In our 2009 Outlook, we stated in our base case scenerio that:

"We expect that real GDP growth in both the first and second quarters of 2009 will be negative – close to the fourth quarter 2008 decline in the first quarter, and less negative in the second quarter. We expect real GDP growth to be roughly flat in the second quarter".

In recent weeks, we have been writing that based on the incoming data, the pace of decline in real GDP Q1 2009, would not be as severe as the 6.2% drop recorded in Q4 2008, and that is still largely the case, but only if we only refer to the "front-end" of the economy – Consumer sector. Accounting for two-thirds of GDP, consumer spending appears to have stabilized in early 2009 relative to the fourth quarter 2008, as evidenced in recent reports on real personal spending in January, retail sales in January, and the chain store sales data for both January and February. The February retail sales report from the U.S. government is due out later this week.

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