Thursday, January 29, 2009

That sinking feeling; new numbers will show that U.S. economy is shrinking at shocking pace

The New York Times reports tonight that the U.S. economy shrank at a shocking rate of 5.4 percent in the last three months of 2008 and probably now is shrinking at a whopping 4%.

So the ill feeling you have about the future is sound. And the months ahead are just going to keep us nauseated.

The Times reports:

The Commerce Department is set to release a report Friday expected to show the economy shrank at a pace of 5.4 percent in the October-December period, a much faster descent than the 0.5 percent decline logged in the prior quarter.

If economists' forecasts are correct, it would mark the weakest quarterly showing since an annualized drop of 6.4 percent in the first quarter of 1982, when the country was suffering through a severe recession.

''It was a bloodbath,'' said Richard Yamarone, economist at Argus Research, referring to the economy's fourth-quarter performance.

A massive pullback by consumers is expected to play a prominent role in the economy's worsening backslide. They are cutting back on spending as jobs disappear and major investments -- homes, stocks, retirement accounts -- tank in value.

Businesses are retrenching, too, as profits shrivel and demand wanes from customers in the U.S. and overseas.

''Households and businesses were bombarded by all the fallout,'' Yamarone said.

Many economists think the fourth quarter will turn out to be the worst quarter for the recession, which is now in its second year. But the economy will stay very weak in the months ahead. Analysts believe the economy is contracting in the current quarter at a pace of 4 percent or more.

Pepto-Bismol, anyone?

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