Long Steep Downfall Based on GDP Revision

The economy witnessed a faster rate of contraction compared to what was initially estimated during the last couple of months of 2007, according to a government report last Friday. The report indicates that a much deeper recession is on the works and will create bigger challenges on both the health system and the financial system.

Stocks in the Lead for Market Worries

A good number of financial stocks have resulted in the market going down because of the economic worries and the concerns regarding nationalization. This was cited after the government mentioned that it intended to increase the stake it had in the Citigroup Company. During the fourth quarter of the previous year, the gross domestic product or the GDP fell down at a six point two percent annualized rate. This was said to be the steepest decline it had ever experienced ever since the recession of 1982. It was also sharper than the reported three point eight percent which was reported a while back.

Most major components of the entire economy also got smaller, save for government spending. A lot of economists also mentioned that most signs have been pointing to the same kind of drop in terms of output during the current quarter. John Ryding, who is the acting chief economist of the company RDQ Economics, says that such is a very ghastly report. For certain, it can be referred to as the longest recession during the postwar years and more importantly, one that has the biggest potential to be the deepest one, too.

Revisal of GDP Expectations

As the most extensive measure of the nation’s goods and services output, the gross domestic product is expected to be trimmed down. However, a lot of economists are also projecting another decline which is around the figure of five point four percent which capped off the year 2008. Such a plunge is considered as very steep compared to the previous quarter – a time when the economy had shrunk to point five percent. The stocks of the company Citigroup fell to ninety six cents to rest at one dollar and fifty cents. This was an eighteen-year low and that the government will also be expecting its stake to grow around thirty six percent.

A lot of shareholders also agreed that they will convert their holdings and make it the common stock as well. The Bank of America, on the other hand, fell from three dollars and ninety five cents to one dollar and thirty seven cents. The industrial average of the Dow Jones decreased by one point sixty six percent to end at seven thousand sixty-two and ninety three cents. The 500-stock index of Standard and Poor, on the other hand, decreased two point thirty six percent to rest and seven hundred and thirty five point nine.