US economy contracts further in third quarter

December 26th, 2008 - 8:56 pm ICT by IANS  

Washington, Nov 26 (Xinhua) The US economy contracted in the July-September period by 0.5 percent, much deeper than first thought, the US commerce department has reported.The updated reading was more than the rate of decline in the gross domestic product (GDP) first estimated at 0.3 percent a month ago, and the worst showing since the world’s largest economy shrank at a pace of 1.4 percent in the third quarter of 2001, when the nation was suffering through its last recession.

A country’s GDP is the combined value of all goods and services produced in that country in a given period. The third quarter GDP data of the US will be revised once more by the department.

“The numbers are what they are, which is they’re troubling. This is why we are having to take such bold actions which we are taking,” White House spokeswoman Dana Perino told reporters.

“We think one of the reasons that the data sort of declines is that consumers pulled back on spending and we think a lot of that is because of the credit crisis, which is why we are so focused on un-freezing credit markets,” she was quoted as saying.

The contraction came as nervous consumers cut back on their spending by 3.7 percent, the biggest amount in 28 years. That compared with an earlier estimate of a 3.1 percent drop.

It marked the first drop in consumer spending, which accounts for two thirds of overall economic activity, since late 1991, when the economy was coming out of a recession.

That reflected a 15.2 percent drop in durable goods such as cars and appliances, expected to last three years or more. It was the sharpest decline since 1950.

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