Quarterly GDP Down 0.5% in Third Quarter – Chart of the Day

The Commerce Department released revised quarterly GDP data yesterday, showing that the nation’s economy contracted in the third quarter. The 0.5% annual decline in domestic gross product from July to September is worse than the initially estimated 0.3% and it’s the severest since the third quarter of 2001 when the economy shrank 1.4%.

Since the crisis began last summer, we have seen two negative GDP figures (the first one was the fourth quarter of 2007), but no consecutive declines, which means the economy is not statistically in a recession yet. The general definition of recession is “two consecutive quarters of negative growth (or contraction) of gross domestic product (GDP).” Looking at the above chart, there were no two consecutive quarterly negative GDP growth from 2000 to 2002 when the dot com bubble burst either, but everybody knew the economy was in a recession, just like how everybody is seeing the economy now.

Given what happened in October and so far in November, we may have an official recession when the data for the fourth quarter comes out.

*Data source: Bureau of Economic Analysis

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