US shrinks 6.2 pct in last quarter of ’08

Bloomberg

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Gross domestic product contracted at a 6.2 percent annual pace from October through December, more than economists anticipated and the most since 1982, according to revised figures from the Commerce Department Friday. Consumer spending, which comprises about 70 percent of the economy, declined at the fastest pace in almost three decades.

The recession is forecast to persist at least through the first half of this year as job losses mount and purchases plummet. The Obama administration’s attempts to break the grip of the worst financial crisis in 70 years are unlikely to bring immediate relief as companies from General Motors to JPMorgan Chase cut payrolls.

"The economy really hit the brakes very hard in the fourth quarter," John Herrmann, president of Herrmann Forecasting, said before the report. "We’re in a pretty severe, protracted recession. The economy could continue to struggle into 2010."

For all of 2008, the economy expanded 1.1 percent as exports and government tax rebates in the first six months helped offset the deepening slump in consumer spending that followed.

Consumer spending dropped at a 4.3 percent annual rate last quarter, the most since 1980, after falling at a 3.8 percent pace the previous three months. That marks the first time purchases have dropped by more than 3 percent in consecutive quarters since record-keeping began in 1947. Americans may further reduce spending as employers slash payrolls.