The recession deepened in the first three months of this year as the U.S. economy shrank at an annual rate of 2.8 percent, the government said Friday.
The Commerce Department said that the gross national product, the country's total output of goods and services, fell at an even faster pace than the 1.6 percent rate of decline recorded from October through December.It marked the first back-to-back GNP declines, the classic definition of a recession, since America's last downturn in 1981-82.
The National Bureau of Economic Research, the group of academics who are considered the official arbiters of when recessions begin and end, said Thursday that the recession actually began during the third quarter of last year even though GNP during that period was up 1.4 percent.
The bigger question for the country is when the recession will end, and on that economists are divided.
The GNP price index that measures a fixed marketbasket of goods jumped at an annual rate of 5.1 percent in the first quarter, compared to a 4.7 percent rise in the fourth quarter.
While the 2.8 percent decline in GNP was only slightly worse than many economists had been expecting, it did serve to emphasize the widespread weakness in the U.S. economy.
Virtually every area of economic activity posted declines during the first quarter of the year.
Consumer spending, which accounts for two-thirds of total economic activity, fell for a second consecutive quarter, something that has not happened since the first half of 1980. Even in the severe 1981-82 recession, consumer spending did not drop two quarters in a row.
The 1.4 percent decline in consumer purchases in the first quarter subtracted $9.5 billion from the GNP and followed an even sharper 3.4 percent fourth quarter drop.
The biggest negative factor in the first quarter came from a $19.8 billion drop in business investment as companies, faced with slack demand, cut back on their purchases of capital equipment.
Other areas of weakness included a $12.1 billion drop in residential construction and a rare decline in government spending, which fell $4.8 billion in the first quarter.
One of the few areas of strength in the GNP report came from further improvement in the country's trade performance as imports shrank by 6.9 percent, offsetting a slight 0.4 percent drop in exports.
The Bush administration is preparing to press its major trading partners this weekend to cut their interest rates in order to ensure that demand for American exports resumes growing. Export demand has been one of the few bright spots in the economy for the past two years.
The various changes subtracted $29.5 billion from total output at an annual rate in the first quarter after cutting GNP by $16.6 billion in the fourth quarter. The level of GNP, after adjusting for inflation, fell to $4.12 billion in the first quarter.
So far, the country has lost 1.1 percent of output since the economy peaked in mid-1990. By comparison, the severe 1981-82 downturn, the worst since the Great Depression, cut output by 3.2 percent.
The Bush administration, anxious to go into the 1992 election with a growing economy and declining unemployment, is keeping up pressure on the Federal Reserve to cut interest rates to insure that this slump does not approach the last recession in severity.
On Thursday, President Bush said, "We want to see these interest rates down a little bit, and I think that would be good for the world economy, including our own."
Bush's comments were expected to be followed by even more blunt talk on Sunday from Treasury Secretary Nicholas Brady when he meets with key U.S. allies to plot global economic strategy.