Economy Shrinks 6.1%

Economists who expected to see improvement in the first quarter of 2009 have been sorely disappointed. GDP shrank by 6.1 percent from January through March, a rate that is hardly different from the 6.3 percent we saw in the fourth quarter of 2008, when the recession deepened. Economists had expected a 4.6 percent drop in the first three months of the year. This marks the third consecutive quarter in which GDP has fallen. The last time that happened was 34 years ago, from the third-quarter of 1974 through first-quarter of 1975. The fall is attributed to weaker investment in housing, combined with an inventory adjustment. But the drawdown of stockpiles of goods is good in the long run because it is an important step toward bringing inventories under control and ending a production freefall. International trade boosted the economy early this year, adding 1.99 percentage points to GDP. Had it not been for this, the U.S. economy would have fallen even further.