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 today in Washington. 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 Corp. to JPMorgan Chase & Co. cut payrolls.
The 2.4 percentage-point revision was almost five times as large as the average adjustment, Commerce said.
The world's largest economy shrank at a 0.5 percent annual rate from July through September. The back-to-back contraction is the first since 1991.
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. Companies cut 598,000 workers in January, bringing total job cuts to almost 3.6 million since the recession started in December 2007.
More cutbacks are on the way. General Motors, which is seeking $16.6 billion in new federal loans, said this month it is cutting another 47,000 jobs globally. The company reported yesterday it lost $30.9 billion last year.
Companies trimmed inventories at a $19.9 billion annual rate last quarter rather than allowing them to swell at a $6.2 billion pace as previously reported. The updated reading accounted for half of the 2.4 percentage-point reduction in growth.
Purchases of new equipment also plunged last quarter. Business investment dropped at a 21 percent pace, the most since 1980. Spending on equipment and software dropped at a 29 percent pace, the most since 1958.
Cutbacks continue this quarter. Orders for durable goods in January fell 5.2 percent, marking a record sixth consecutive drop, Commerce said yesterday.
The collapse in global trade subtracted a half percentage point from growth last quarter, compared with the 0.1 point gain projected in the advance report. The International Monetary Fund said last month the global economy will grow 0.5 percent this year, the weakest postwar pace, indicating U.S. exports are likely to remain depressed.
The slump in home construction accelerated, contracting at a 22 percent pace last quarter after a 16 percent drop in the previous three months, today's report showed. Housing is likely to remain a drag on growth as Commerce figures last week showed U.S. builders broke ground in January on the fewest houses on record.
Since taking office last month, President Barack Obama has focused on three initiatives -- a $787 billion stimulus bill, a bank-rescue plan and an effort to limit home foreclosures -- while warning of economic ``catastrophe'' if the government doesn't take aggressive action.
Federal Reserve Chairman Ben S. Bernanke said this week the U.S. economy is in a ``severe'' contraction, and warned the recession may last into 2010 unless policy makers can stabilize the financial system.
The GDP report is the second for the quarter and will be revised in March as more information becomes available.