GDP Contraction in Q4

GDP contracted in the fourth quarter at a 3.8% annualized rate. The silver lining of this very dark cloud is that the GDP figure beat the consensus estimate, which forecasted GDP contraction at 5.4% for the quarter. GDP saw most of its contribution come from a combination of built up inventories and continued strength in exports. This should be of little comfort as both of these contributors are likely to be decimated in 2009 as consumer demand continues to plummet and the dollar strengthens amid continued monetary easing on a worldwide basis. The moral of the story is we can expect further declines in economic activity in 2009 as the culture of de-leveraging continues in America and abroad.