OPINION

U.S. economy shrinking

Andrew Clark and Kathryn Hopkinsin

The American economy shrank at its fastest pace since 1982 during the final quarter of last year amid a worsening slump in activity described as a “disaster” by President Barack Obama.

The U.S. Commerce Department said gross domestic product, which measures total output of goods and services, plummeted at an annualised rate of 3.8 per cent in the three months to December. Consumption of durable goods such as cars and furniture plunged by 22.8 per cent. Overall consumer spending dropped 3.5 per cent.

Speaking at the White House as he launched a taskforce on aiding the middle classes, President Obama described the contraction as “a continuing disaster for America’s working families.”

“The recession is deepening and the urgency of our economic crisis is raw,” said Mr. Obama, who noted that U.S. unemployment claims had reached their highest level on record.

The fall in GDP, which followed a third-quarter drop of 0.5 per cent, was less severe than economists had expected with many forecasting a contraction of 5.4 per cent. Experts said the slower decline was due to a rise in stocks on shops’ shelves as businesses struggled to cut output. “The consumption side of the equation is the worst we’ve seen since the 1960s and there’s no evidence that things are getting any better,” said Steve Ricchiuto, chief economist at Mizuho Securities in New York. — © Guardian Newspapers Limited, 2009

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