The drop in this measure of the total number of goods and services produced is the biggest falloff in a decade and follows an anemic GDP annual increase of 0.3% through the second quarter of the year. Should it fall again in the final quarter of the year, than the economy would meet the classic definition of being in a recession.
Despite this news, Newport Communications Senior Economist Jim Haughey says the report is good news, since a decline of over 1% was widely expected.
“Apparently, the impact of the attacks on consumption spending outside of New York City was much less than feared by New York-based forecasters. And it is clear that the economy was growing slowly before Sept. 11."
Haughey predicts another decline in GDP, probably larger than this one, is almost certain for the current quarter.
Durable goods spending fell 1.7% compared to 7% in the last quarter. However, non-durable goods (packaged goods hauled in dry vans) spending was up 0.6% compared to 0.3% in the summer. Consumption increased 1.2%, much slower than the 2.5% increase reported last quarter.
Together, consumer goods spending rose about $7 billion. But other key freight sources shrank rapidly, more than offsetting the consumption gains. Foreign trade in goods (imports and exports) fell over $80 billion and business investment spending (excluding software) plunged $17 billion. Also inventories fell $50 billion, meaning many of the goods sold did not have to be transported.