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GDP Fell Sharper 1.1%, Worst Since '91 Slump, On Inventory Work-Off Trade Also Hurt Q3 Results Eventually low stockpiles will lead to an output rise; Chicago purchasers glum.(A)
Byline: DONALD H. GOLD
The economy shrank 1.1% in the third quarter, marking the biggest downturn in more than a decade as the recession that began last March picked up steam.
The bigger-than-expected drop in gross domestic product is a revision from the 0.4% decline reported a month ago, the Commerce Department said.
The lower figure marks the worst showing since a 2% plunge in the first quarter of 1991 in the last recession. Analysts had looked for a 0.9% drop.
Still, the plunge may set the stage for better times ahead. The biggest factor in the revision was falling inventories.
Those drawdowns were $10 billion greater than first estimated, a total of $60.1 billion for the quarter. This revision alone sliced 0.75 percentage point from GDP.
That's the bad news -- and the good news. Inventories are drawn down through output cuts. Producers make less and need less materials and labor. But once bloated stockpiles are cut, companies can ramp up output.
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