US GDP shrinks 3.8%, most in 26 yrs

The world's largest economy US has contracted 3.8 per cent in the fourth quarter of 2008, the most since 1982, as the worst ever financial turmoil in nearly 80 years crimped consumer and business spending.
The nation's economy which officially entered into recession in December 2007, shrunk 3.8 per cent in the December quarter, according to the advanced estimates from the Bureau of Economic Analysis.

Moreover, the decline is the worst since the GDP fell 6.4 per cent in the first quarter of 1982.
"Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 3.8 per cent in the fourth quarter of 2008," the BEA which is part of the Commerce Department said in a statement today.
In the third quarter of last year, the GDP had declined 0.5 per cent.
Reportedly, experts had expected the economy to shrink 5.4 per cent in the fourth quarter. Nonetheless, the figure is grim considering the worsening financial situation.
However, the BEA noted that that the fourth quarter advance estimates are based on "source data that are incomplete or subject to further revision..."
For the full year 2008, American economy grew just 1.3 per cent compared to two per cent rise in the year-ago period.
According to the statement, the drop in fourth quarter real GDP was mainly due to negative contributions from exports, personal consumption expenditures, equipment and software and residential fixed investment.
Noting that most of the major components contributed to the decrease in fourth quarter real GDP, BEA said, "the largest contributors were a downturn in exports and a much larger decrease in equipment and software. The most notable offset was a much larger decrease in imports".
Regarding the full year 2008 advanced GDP figure of 1.3 per cent, the BEA pointed out that the growth was primarily on account of exports, personal consumption expenditures (PCE) for services, federal government spending, non-residential structures, state and local government spending.
"These were partly offset by residential fixed investment, PCE for goods, equipment and software, and private inventory investment," the statement said.
On the other hand, BEA noted that deceleration in real GDP (as compared to a growth of two per cent in 2007) primarily reflected a sharp fall in PCE, a downturn in equipment and software, and decelerations in exports and in state and local government spending.
Meanwhile, American President Barack Obama is expected to come up wtih an 819-billion dollar stimulus package to bolster the nation's sagging economy and also create nearly four million jobs.