U.S. Economy Shrinks Faster Than Expected

U.S. Economy Shrinks Faster Than Expected

The Commerce Department report said the decline in the gross domestic product - a measure of a country's total output of goods and services - in the last quarter of 2008 was the worst since the 1982 recession. That indicated that the recession has been deeper than previously believed. Economists are expecting a similar drop in the first quarter of 2009 as well.

"What a ghastly report," said John Ryding, chief economist at RDQ Economics. "Since the recession started in December 2007, this will almost certainly be the longest postwar recession, and now potentially the deepest one as well."

In reaction, stocks tumbled in early trading but pulled off their lows after the Standard & Poor's 500 index broke through a closely watched November trading low of 741.02, which came during the height of the credit crisis. The Dow Jones industrial average came within 34 points of falling below the 7,000 mark for the first time in more than 11 years. But by midafternoon trading, the indexes were mixed.

With the exception of government spending, every major component of the economy shrank.

February 27, 2009

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