Slack Consumer Spending Puts GDP Into Reverse

Washington, DC, Oct. 20, 2008--The economy contracted during the third quarter as consumers cut back on their spending by the biggest amount in 28 years.

However, the decline was less than economist expected.
 
Gross Domestic Product shrank at a 0.3 percent annual rate in the July-September quarter, the Commerce Department reported Thursday. It marked the worst showing since the economy contracted at a 1.4 percent pace in the third quarter of 2001, when the nation was suffering through its last recession.

The latest GDP reading marked a rapid slowdown for the economy, which logged growth of 2.8 percent in the second quarter.

The deterioration reflected a sharp retreat by consumers, whose spending accounts for the largest chunk of national economic activity. Consumers cut spending at a 3.1 percent pace in the third quarter, the most since the second quarter of 1980.

Many economists believe the economy will continue to contract into next year, which would more than meet a classic definition of recession -- two straight quarters of shrinking GDP.