US GDP plunged in last 2008 quarter
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The US economy shrank at a rate of 3.8 percent during the last quarter of 2008, government data showed, marking its worst performance since 1982 and the first consecutive decline in Gross Domestic Product since the fourth quarter of 1990.
REUTERS - The U.S. economy shrank at its fastest pace in nearly 27 years in the fourth quarter, government data showed, sinking deeper into recession as consumers and businesses cut spending.
The Commerce Department on Friday said gross domestic product, which measures total goods and services output within U.S. borders, plummeted at a 3.8 percent annual rate, the lowest pace since the first quarter of 1982, when output contracted 6.4 percent. GDP fell 0.5 percent in the third quarter. These were the first consecutive declines in GDP since the fourth quarter of 1990 and the first three months of 1991.
Analysts polled by Reuters had forecast GDP contracting 5.4 percent in the fourth quarter. The U.S. economy slipped into recession in December 2007, driven by the collapse of the housing market and resulting global credit crisis.
For 2008, GDP rose 1.3 percent, the slowest pace of growth since 2001, when the economy expanded 0.8 percent.
The advance report from the Commerce Department showed consumer spending, which accounts for two-thirds of U.S. economic activity, fell 3.5 percent in the fourth quarter after declining 3.8 percent in the third quarter, also the first consecutive drops since the last quarter of 1990 and the first quarter of 1991.
Spending on durable goods like cars and furniture plunged 22.4 percent, the steepest decline since the first quarter of 1987.
In response to the slump in demand, investment by business slumped 19.1 percent for the sharpest pull-back since the first quarter of 1975. Residential investment plummeted 23.6 percent.
The sharp economic downturn is putting a lid on inflation pressures, with the personal consumption expenditures price index plunging a record 5.5 percent after rising 5 percent in the third quarter. Excluding volatile food and energy items, core prices grew at a muted 0.6 percent, the slowest rate since the fourth quarter of 1962. Core PCE rose 2.4 percent in the third quarter.
Analysts polled by Reuters had forecast the PCE index falling 5.4 percent.
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