Shrinkage

This isn’t good:

The gross domestic product shrank at an annual rate of 6.1 percent from January through March, the Bureau of Economic Analysis reported. It was the third straight quarter of declines and capped the worst six months of economic activity since the late 1950’s.

To avoid an undue sense of panic, however, it is worth recalling that this is information about the past. We already saw the terrible jobs reports from January and February and March, so we already knew that economic conditions were terrible. This report is basically a rerun of a terrifying first quarter that ended about a month ago. Thus far, April looks to be less bad than Q1 was, though that’s “less bad” in the sense of “deteriorating more slowly” rather than “actually better.”

In particular, business investment plunged, as we moved into a new gear of recessioniness. Basically, when bad conditions persist for a bit, businesses start making investment decisions that are based on a perceived paucity of business opportunities. And in the business-side version of the paradox of thrift, when too many businesses start thinking that way the prophesy becomes self-fulfilling.