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Nation's Economy Worse Than First Thought in 4Q

The nation's gross domestic product (GDP) shrank at an annual rate of 6.3% in the 4Q of 2008, the Commerce Department reported. It was the worst showing in a quarter-century, and was slightly worse than the government's prior 4Q GDP estimate of a 6.2% decline. Rising unemployment, falling home values and shrinking investment portfolios are forcing consumers to cut back on spending. Faced with declining sales and profits, companies are slashing production and jobs. The result has been a deep recession that is now in its second year. The main culprit behind the 4Q GDP downgrade was that businesses cut inventories more deeply than estimated a month ago. Builders also cut spending on commercial construction more deeply than previously thought. In the final quarter of last year, consumers cut spending at a 4.3% annual rate, the same as previously estimated. Consumers cut spending on "nondurables," such as food and clothes, at a 9.4% pace. Business cut spending on equipment and software at an annual rate of 28.1%. Spending on commercial construction dropped an annualized 9.4%. Home builders slashed spending by 22.8%.

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Date Last Updated: 04/02/2009