Bloomberg: Economy in U.S. Probably Contracted Most Since 1982 as Spending Collapsed

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Slump Probably Deepened as Credit Froze: U.S. Economy Preview
By Timothy R. Homan


Jan. 25 (Bloomberg) -- The worst credit crisis since the Great Depression sent the U.S. economy into a tailspin at the end of 2008 as consumers and businesses retrenched, reports this week may show.

Gross domestic product contracted at a 5.5 percent annual rate from October through December, the biggest drop since 1982, according to the median estimate in a Bloomberg News survey ahead of Commerce Department figures due Jan. 30.

President Barack Obama and Congress are working to pass an economic stimulus plan worth $825 billion by mid-February to stem what may be the worst recession in the postwar era. Federal Reserve policy makers, under Chairman Ben S. Bernanke, also meet this week amid growing expectations they’ll unveil more tools to unclog lending after having cut interest rates to as low as zero.

The recession “entered a more negative and pernicious phase in the fourth quarter,” said Brian Bethune, director of financial economics at IHS Global Insight in Lexington, Massachusetts. It’s “potentially the worst recession that we’ve seen in terms of the severity and the depth.”

The projected contraction last quarter would follow a drop of 0.5 percent at an annual pace in the prior three months. .......(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601087&sid=ayFlXO6K.CSM&refer=home