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4Q GDP Much Worse Than First Estimated

The U.S. economy shrank at a much faster pace in the 4Q than originally thought, as consumers and businesses reined in spending dramatically. The Commerce Department said the nation's gross domestic product contracted at a 6.2% annual rate in the last quarter of 2008, which was significantly worse than the government's initial estimate of a 3.8% drop. Economists expect the first and second quarters of 2009 to show weak results as employers slash payrolls and anxious consumers continue to cut back on spending. The grim 4Q followed a 0.5% annual rate of decline in the 3Q. The 6.2% decline marked the weakest quarterly showing since an annualized drop of 6.4% in the first quarter of 1982, when the country was enduring a recession. Consumers cut spending at a 4.3% pace in the latest quarter, the biggest decline since the second quarter of 1980. Businesses slashed spending on equipment and software at an annualized rate of 28.8%. Builders cut spending on commercial construction projects by 21.1% and homebuilders slashed spending at a 22.2% annual rate.

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Date Last Updated: 03/04/2009