Spending Dive Sends GDP Down

Economists fear prolonged recession inevitable as numbers erode
By Jim O'Neill,  Newser User
Posted Oct 30, 2008 8:28 AM CDT
Shoppers walk next to a large at Abercrombie & Fitch, at a mall in San Jose, Calif.   (AP Photo/Paul Sakuma)
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(Newser) – The US economy shrank less than expected in the third quarter but still suffered the biggest contraction since the 2001 recession, reports Bloomberg. The gross domestic product fell 0.3%, led by the first fall off of consumer spending in two decades. The figure, out from the Commerce Department this morning, beat the forecast 0.5% annual rate but nevertheless rang alarm bells among economists who warned a prolonged recession is likely.

“The fourth quarter is going to be much worse as the crescendo of financial disruption reached a high point this month,” said one economist. Consumer spending was off 3.1%, more than expected and the most since 1980, reports the Wall Street Journal. Durable goods purchases were off 14.1%, and housing investment plunged 19.1%. "The crisis really kicked up in late September," said an analyst.