Home / Markets / Economy
Thursday, October 30, 2008
Economy Contracts 0.3% in Third Quarter
Ken Sweet
FOXBusiness
The U.S. economy contracted in the third quarter, marred primarily by the weakest consumer spending in nearly three decades, the Commerce Department reported Thursday.
It marks the first of what many economists say will be two or more quarters of negative growth. Two consecutive negative-growth quarters are needed for economists to officially declare a recession.
The Commerce Department said the U.S.’s gross domestic product declined by a seasonally adjusted pace of 0.3%. It was the first estimate of third quarter GDP.
The number, however, was better than what economists had expected. According to Thomson Reuters, Wall Street economists were expecting a decline of 0.5% in GDP.
Of the components tracked by the government, consumer spending was the biggest drag on the economy. Consumer spending, which accounts for around 70% of the U.S.’s GDP, fell by 3.1%. It was the sharpest drop in consumer spending since the second quarter of 1980.
Government spending rose by 5.8% in the quarter, primarily because of military spending.
“The economy is in recession,” said Ian Shepherdson, chief U.S. economist with High Frequency Economists.
Shepherdson expects the economy to contract by 1% in both the fourth quarter this year, and in the first quarter of 2009.
Fox Business Video
-
-
Helping Veterans Land Jobs
-
Jul 2, 2009
Baird on Helping Soldiers
-
-
-
President's Plans Working
-
Jul 2, 2009
Goodstein on Stimulus Success
-
-
-
Jackson Lives On
-
Jul 2, 2009
Beck on Future of Jackson
-
-
-
$20 Dollars a Gallon
-
Jul 2, 2009
Paying More to Save Economy
-
-
-
Looking for the Road to Recovery
-
Jul 2, 2009
Morris on Unemployment
-
FOX Translator
No data currently available.
No data currently available.
Some mutual funds want you to pay for the privilege of them (or your investment adviser) taking your money to invest. It's called a load, and it works like a cover charge to get into a nightclub. Luckily, there are such things as no-load funds. As the name implies, shares of these funds are sold without a fee paid to a broker or investment advisor.
The entire amount you invest in no-load funds goes to work for your returns. On the other hand, with load funds, right off the bat you're charged commission (not to mention other fees incurred over the life of the investment). Let's say, for example, you invest $25,000 into a load fund that charges a 5% commission. This costs you $1,250 off the top, bringing your actual investment down to only $23,750.
The often-cited horse race analogy argues against investing in load funds. Here's the logic behind it: Would you place a bet on a horse that had to start a race 200 yards behind the others? Well, maybe you would if you got a tip from a sketchy, trench coat-clad man in a dark alley. However, under most circumstances, it's not smart to put your money on that handicapped horse.
But some argue that at times that man in the trench coat (aka your broker) knows more about the horses than you do, and has a better shot at picking a winner. Also, sometimes these fees are unavoidable because some funds are available only through investment advisers.
Cost-benefit analysis can help determine when a load fund is worth it (in other words, when it will score you a load) and when it is better to "do it yourself" and avoid the fees. Load-fund fees range depending on share class and can cover a variety of costs, such as paper work and fund management.
