Economic Tailspin Continues: GDP Shrinks 6.3%

I'm looking for reasons to hope. They're not immediately evident but there are some. Mostly, it's just horrible news piled on top of really bad news:

The U.S. economy contracted at a steeper-than-expected pace in the first quarter, weighed down by sharp declines in exports and business inventories, according government data on Wednesday that showed the economy was still deep in recession.

Gross domestic product, which measures total goods and services output within U.S. borders, dropped at a 6.1 percent annual rate, the Commerce Department said, after shrinking 6.3 percent in the fourth quarter.

CNBC tries to make it sound somewhat heartening but it's a hard sell. This is very troubling:

Investment by businesses tumbled a record 37.9 percent in the first quarter, while residential investment dived 38 percent, the biggest decline since the second quarter of 1980.

The residential number is bothersome but expected. The business investment number is the really scary element. Until businesses decide the paradigm is changing, they will horde cash, not invest in upgrades and capital improvements, not hire and not take on new vendors. The cycle will just continue.

Granted, the fact that consumer spending increased is a good thing but is that more a case of buying things they put off spending money on last quarter and last year or is it a sign that people are feeling better about the economy? A question that is far from being answered right now I'm afraid.

As an aside, I'm seeing some life in the construction sector and that can be attributed to government spending under the stimulus bill. However, Obama didn't put nearly enough money into construction as he should have--instead loading up pork-filled projects--so this may be only a temporary uptick.