GDP Shrinks in Q4 But Better Than Expected

Washington, DC, Jan. 30, 2009--The economy shrank at a 3.8 percent pace at the end of 2008, the worst showing in a quarter-century, as the deepening recession forced consumers and businesses to throttle back spending.

The new figure, released Friday by the Commerce Department, showed the economy sinking at a much faster clip in the October-December period than the 0.5 percent decline logged in prior quarter.

Although economists expected an even worse fourth-quarter performance -- a staggering 5.4 percent rate of decline -- the results were still grim.

The report provided clear evidence of the economy's rapid deterioration as the housing, credit and financial crises -- the worst since the 1930s -- feed on each other. It's a vicious cycle that has proven difficult for Washington policymakers to break.

The 3.8 percent annualized drop marked the weakest quarterly showing since a 6.4 percent annualized plunge in the first quarter of 1982, when the country was suffering through a severe recession.

For all of 2008, the economy grew by just 1.3 percent. That was down from a 2 percent gain in 2007 and marked the slowest growth since the last recession in 2001.