GDP Contraction Exceeds Expectations

US real gross domestic product (GDP) slid at an annual rate of 6.1% in Q109 as unemployment rose, slashing the output of goods and services. Downsizing and job loss either contributing to or resulting from the GDP contraction may also heap pressure on now-unemployed homeowners. The quarter’s contraction comes after GDP shrank 6.3% in Q408, the US Department of Commerce said Wednesday in its advance estimates. Residential fixed investment helped drive the decline, although a decrease in imports — which negatively affect GDP — slightly offset the total losses. A downturn in federal government spending helped steer the rate of decline down slightly from last quarter, the Commerce Department said. Real personal consumption expenditures rose 2.2% in the quarter, after falling 4.3% in Q408. Surveyed economists expected a 4.6% decline in GDP during the quarter, the Wall Street Journal reported. The actual decline indicates worse-than-expected economic conditions impacted the quarter’s labor and production. Jobless claims jumped in mid-April, for example, as first-time applications for state unemployment benefits in the week ending April 18 rose by 27,000 to a seasonally-adjusted 640,000, the US Labor Department said. In California, a state posting one of the top five largest mid-April increases in unemployment claims, has seen an effect on homeowners’ ability to maintain payments. Notices of default filed on California homes jumped 80% from the prior-year period in the first quarter, real estate information provider DataQuick Information Systems said in late April. Write to Diana Golobay at [email protected].