The GDP grew 2.2% in 2007 and slow 0.6% in the fourth quarter of 2007. Raw Story says economists were expecting 1.2% growth in Q4.
For all of 2007, the economy grew by just 2.2 percent, the weakest performance in five years, when the country was struggling to recover from the 2001 recession. The housing collapse dealt the economy its biggest blow last year. Builders slashed spending on housing projects by 16.9 percent on an annualized basis, the most in 25 years.
"The economy has been subject to something of the perfect storm here. It has been hit by the housing slump the credit squeeze, the subprime slime and stock price declines on Wall Street," said economist Ken Mayland, president of ClearView Economics. "The economy is weathering some pretty stormy seas but it is weak."
The fourth-quarter's performance was much weaker -- half the pace -- than economists were expecting. They were forecasting growth to clock in a 1.2 percent pace.
The 0.6 percent annualized increase in gross domestic product (GDP) marked a big loss of momentum from the third quarter's brisk, 4.9 percent showing. The fourth-quarter pace was the slowest since the first quarter of last year.
IDEAglobal's chief U.S. economist calls it "stall speed" according to MarketWatch.com.
"The GDP hit stall speed," wrote Joseph Brusuelas, chief U.S. economist at IDEAglobal.
GDP hadn't been any slower since the end of 2002, when the economy was struggling to recover from the recession a year earlier.
The 1st quarter 2008 GDP is going to be interested. Will the economy tread along, pick up speed or start to step into a recession?
Sometimes it is worth tacking a look at how we got into this mess in the first place. Reuters has a great recap in the video below. It began with a US housing problem that has quickly mushroomed into a crisis. In this video, Reuters explains how banks begin to tighten credit when a high percentage of subprime mortgages started to become overdue. The loan problem escalated and subprime lender New Century filed bankruptcy. These losses spread to larger banks that have had to write off billions of dollars of debt. Today, the credit problems have not gone away. Home prices are still dropping and inflation is a serious problem. The weakening economy is starting to impact growth and job creation. There are worldwide concerns that the U.S. will fall into a recession and this recessio nwill drag the global economy down with it.
Apple (AAPL) has been taking a beating on Wall Street today. The stock is down over 10%. The reason isn't the company's holiday performance but the possibility of a weaker future. Forbes is asking if one bad Apple could spoil the bunch - meaning could Apple weakness spill over into other tech stocks. It's hard to see gadgets having as good a year this year as they did last year if we are heading into a recession.
To some extent, it's a case of one bad Apple (AAPL) spoiling the bunch. Steve Jobs & Co. is seen as the most innovative, growth-producing group in tech. And if the U.S. consumer's economic troubles are starting to rattle mighty Apple, high fliers like Research In Motion (RIMM) and Google (GOOG) might not be immune, either.
Indeed, Apple's holiday performance showed signs that the company's not unstoppable in 2008. In particular, Apple's cautious outlook, weakness in U.S. iPod growth and the unpredictability of iPhone sales left Wall Street's pessimists plenty of reason to doubt. And in this jittery market, those pessimists have a lot of power.
First, a recap of Apple's good news - and there was plenty of it. Apple turned in revenue of $9.6 billion and profit of $1.6 billion for the holiday quarter, blowing past the average analyst estimate. The company shipped a record 2.3 million Intel (INTC)-based Macs during the period, and actually sold as many iPhones as computers. In the process Apple generated $2.7 billion in cash, bringing its war chest to $18.4 billion.
But there was troubling news, too. On the conference call with analysts, Chief Financial Officer Peter Oppenheimer admitted that iPod sales merely met the company's expectations, rather than exceeding them. Part of the reason, he said, was that U.S. iPod sales weakened in December - it took overseas sales to make up the difference. "In the U.S., in the gift-buying season, we saw a slightly different curve," he said. "That was made up for in our very, very good growth internationally."
Apple did have a great holiday quarter but what will happen to Apple in the first three quarters of this year with consumers fighting off a recession and rising prices? That's the question investors are asking about Apple and many other gadget manufacturers. There are also concerns that if people already have any iPod will they might not be as excited about owning the latest and greatest iPod - especially if things get tight.
The New York Timesreports that the stock market plunge in Asia and Europe continued into Tuesday. Stocks are falling due to concerns that the U.S. economy is headed for a recession. MarketWatch has a roundup of the two day losses.
Amid fears that the United States may be in a recession, the decline in stock markets accelerated this morning as exchanges opened across Asia.
Markets in Tokyo, Hong Kong, Sydney all fell farther in the opening hours of trading today than they had all day Monday. Until now, overseas markets had largely avoided the sell-off that has caused steep declines recently in the United States, whose markets were closed Monday in observance of Martin Luther King's Birthday. But investors reacted with what many analysts described as panic to the multiplying signs of weakness in the U.S. economy.
And in a sign that the United States could join the sell-off today, trading in U.S. stock futures Monday suggested that the Dow Jones industrial average would fall more than 500 points at the opening bell.
Marketwatch also says that the DJIA futures are currently down 650 points which could result in a miserable and nervous day of stock trading today.
The BBC is reporting some serious drops in foreign markets -- the biggest drops since stock markets plummeted after 9/11. The FTSE 100 was off 5.5%. Paris and Frankfurt are down 7%.
Global stock indexes, including the UK FTSE 100, have fallen their most since the terrorist attacks of September 11 2001 amid fears of a recession.
The FTSE 100 index tumbled 5.5% to 5,578.2, wiping £84bn ($163bn) off the value of its listed shares.
Indexes in Paris and Frankfurt slumped by about 7%, while markets in Asia, India and South America also dropped.
Investors questioned whether a recent plan to boost the US economy would be enough to avert a full-blown recession.
The U.S. markets are closed today to celebrate Martin Luther King Jr.'s birthday. Marketwatch reports that stock future indicate the DOW will open 500 points down on Tuesday morning.
Stocks plunge again as concerns about the economy continue. Marketwatch reports that the DOW is now at a 10-month low. Today was also the worst day of the year for the stock market. It has been a short year and it hasn't been a good year at all so far.
When reminded about how bad things are, the market remembers it should go down," said Art Hogan, chief market strategist at Jefferies & Co.
"And, it is going to take more than just monetary policy to clean up the mess we've made with this economy," Hogan said.
"The Philadelphia Fed Survey was a disaster, defying even the most pessimistic projections," said Frederic Ruffy, an analyst at Optionetics.
Here's a look at the numbers.
DOW - lost 300 points - 2.5%. Hits 10-month low.
NASDAQ - lost 47.69 points - 2%
S&P 500 - lost 39.94 points - 2.9%.
The tumble began when the Philadelphia Fed reported dismal figures.
Shortly before the Fed chairman spoke, the Philadelphia Fed said its measure of manufacturing activity feel sharply to a negative 20.9 from a revised reading of negative 1.6 in December. The report underscored the seriousness of the economic concerns that have in recent weeks drawn the focus of both Wall Street and Washington.
"The Philadelphia Fed just announced dreadful numbers," said John O'Donoghue, co-head of equities at Cowen & Co. He said if you look back at Philadelphia Fed data for similar numbers, it takes you back to the 2001 to 2002 recession.
"It's not rocket science - the economy is slowing dramatically, and it's being reflected in economic reports."
Bloomberg says Merrill Lynch's huge 4th quarter loss also played a role in the bad day on Wall Street.
The Labar Department reported today that wholesale prices roses 6.3% in 2007 - the largest increase in 26 years. The AP reports that big inflation increase could impact the Fed's decision on whether or not to raise rates.
The Labor Department reported that wholesale inflation was up 6.3 percent for all of 2007, reflecting a huge increase for the year in various types of energy costs ranging from gasoline to home heating oil.
Meanwhile, retail sales fell by 0.4 percent in December, the worst showing in six months, the Commerce Department reported. Consumer confidence has plunged, reflecting the worsening housing slump and a lingering credit crisis.
For inflation, the year ended on a more positive note, with wholesale prices falling by 0.1 percent in December. That reflected decreasing costs last month for gasoline and other energy products. It was a significant slowdown after prices had soared by 3.2 percent in November, which had been the biggest one-month increase in 34 years.
The combination of rising inflation pressures and a weak economy represent a dilemma for the Federal Reserve over whether to cut rates to boost economic growth even at the risk of making inflation worse.
Prices were moderating somewhat in December but that could have been the result of holiday sales and weaker energy numbers. It would be a mistake to say continued inflation is not a serious concern for 2008 especially with the spring driving season just ahead.
Reuters reports that Bank of America is buying Countrywide for $4 billion.
The purchase marks another acquisition for Bank of America Chief Executive Kenneth Lewis, who has spent more than $100 billion since 2004 to create the second-largest U.S. bank and the nation's largest consumer bank.
It also provide's a lifeline for Countrywide, which became a poster child for what critics say were lending excesses that fueled the housing and credit meltdown.
The largest U.S. mortgage lender has been convulsed by mounting losses and defaults, a loss of access to credit markets, and a slew of lawsuits and regulatory probes into its lending practices and Chief Executive Angelo Mozilo's pay. On Tuesday, it denied rumors that it might go bankrupt.
Countrywide has been hit very hard by the housing and credit problems. The deal is a big save for them and their shareholders but there are questions about what it means for Bank of America. SeekingAlpha says Bank of America will lose billions in the deal to acquire Countrywide. The Economist calls BofA's purchase a big gamble. Time will tell but it does sound like a risky acquisition.
The stock markets ended on a very sour note as concerns about a recession accelerated. The Dow fell 246 points to 12,606. The S&P 500 lost 19 points to 1,401. The Nasdaq fell 48 points to close at 2,439. Marketwatch reports that the Dow industrials are down 558 points in 8-day run and the Nasdaq is off 8% since year began.
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