I’ll be honest, nothing is more boring to me than the official GDP report. Take into account that this is from a guy who enjoys reading the CPI, employment, and unemployment reports. Anyway, from the report:

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — decreased at an annual rate of 3.8 percent in the fourth quarter of 2008, (that is, from the third quarter to the fourth quarter), according to advance estimates released by the Bureau of Economic Analysis. In the third quarter, real GDP decreased 0.5 percent.

…

The decrease in real GDP in the fourth quarter primarily reflected negative contributions from exports, personal consumption expenditures, equipment and software, and residential fixed investment that were partly offset by positive contributions from private inventory investment and federal government spending. Imports, which are a subtraction in the calculation of GDP, decreased.

Most of the major components contributed to the much larger decrease in real GDP in the fourth quarter than in the third. The largest contributors were a downturn in exports and a much larger decrease in equipment and software. The most notable offset was a much larger decrease in imports.

Private inventory investment means that businesses bought stuff to sell that didn’t sell. Think about all the retailers at Christmas. That isn’t really where you want to see your GDP support. When we start climbing out of this mess, private inventory investment will represent business optimism. Then it will be good. Now, it still represents optimism, just misplaced optimism. Government spending also isn’t necessarily where you want to see growth increasing, particularly since these are borrowed funds. That slices two ways: First, banks are buying treasuries instead of making loans (though I think that’s rational/good behavior). Second, those borrowed funds have to be paid back with interest, so we’re borrowing growth from the future.

Some experts were predicting a fall around 6.5%. That was clearly pessimistic. Here’s Bloomberg’s take on it, U.S. GDP Shrank 3.8% Last Quarter, Most Since 1982:

The U.S. economy shrank the most since 1982 in the fourth quarter as consumer spending recorded the worst slide in the postwar era, a trajectory that’s likely to continue in coming months.

The 3.8 percent annual pace of contraction in the final three months of last year was less than forecast, with a buildup of unsold goods cushioning the blow. Without the jump in inventories, the decline would have been 5.1 percent, the Commerce Department said today in Washington.

“It looks like the economy carried a lot of negative momentum into the first quarter,” former Federal Reserve Governor Laurence Meyer said in an interview with Bloomberg Television.

The economy is likely to contract further after retailers and manufacturers from Starbucks Corp. to Boeing Co. this week announced plans to slash payrolls and cut production to get rid of unwanted goods. Today’s report will maintain the pressure on President Barack Obama to win quick congressional approval of a fiscal stimulus package in excess of $800 billion.

“Without the stimulus plan, the economy would be flat to declining in the second half of the year,” said Meyer, who is now vice chairman of Macroeconomic Advisers LLC in Washington. With the recovery package, the unemployment rate may peak at 8 percent instead of 9.5 percent or higher, he added.

With the stimulus plan, the economy will be flat to declining in the second half of the year. Our economy is far too focused on the consumer. I haven’t seen any reason for the consumer to recover this time around. In the long run, we’ll probably have a more competitive economy because of a shift away from domestic consumption. However, that shift will take time. Until then, there’s going to be a lot of pain.