Report means more bad news for U.S. economy

By THE ASSOCIATED PRESS

Published: November 26, 2008

WASHINGTON — Bad news was no news to the battered American economy on Tuesday.

The government released a triple dose of discouraging data: The economy shrank over the summer even more than previously believed, and consumers reduced their spending by the largest amount in 28 years.

During the same period, home prices fell to levels that had not been seen since early 2004.

"Consumers and businesses were like deer in the headlights … frozen,” said economist Ken Mayland, president of ClearView Economics.

Most of the numbers were updates of previously released figures, and the revisions indicated that economic conditions were growing worse.

But Wall Street barely flinched and actually recorded its third straight day of gains, something that had not happened since the financial meltdown began almost 2 1/2 months ago. The Dow Jones industrials closed up 36 points, following a two-day rally in which the major indexes soared more than 11 percent.

The updated reading on the economy’s performance from the Commerce Department showed the gross domestic product shrank at a 0.5-percent annual rate in the July-September quarter.

That was weaker than the 0.3-percent rate of decline first estimated a month ago, and it marked the worst showing since the economy contracted at a 1.4-percent pace in the third quarter of 2001, when terrorists attacked the U.S. and the nation was suffering through its last recession.

About the GDP

GDP measures the value of all goods and services produced within the U.S. and is considered the best barometer of the country’s economic fitness.

The new GDP figure matched economists’ expectations, but nevertheless underscored just how quickly the economy deteriorated as the housing and credit crisis intensified. The economy logged growth of 2.8 percent in the second quarter.

White House press secretary Dana Perino called the GDP figure "troubling” and said $800 billion in government efforts announced Tuesday may help spur consumer spending by expanding loans availability and cheaper-rate credit cards.

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