The U.S. economy contracted a lot more in late 2008 than first reported, according to U.S. government data released Friday.

Gross domestic product decreased at a seasonally adjusted 6.2% annual rate October through December, the U.S. Commerce Department said Friday in a new, revised estimate of fourth-quarter GDP.

The 6.2% decline meant the worst quarterly showing for GDP since a 6.4% decrease in first-quarter 1982 GDP.

In its original estimate, issued a month ago, the government had reported fourth-quarter 2008 GDP fell 3.8%.

The sharply lower revision to a decline of 6.2% reflected adjustments downward of inventory investment, exports and consumer spending.

The report showed businesses inventories shrank US$19.9 billion in the fourth quarter, instead of rising by US$6.2 billion as Commerce originally estimated.


Trade also took a bite out of the economy in the fourth quarter, the data revisions revealed. U.S. imports fell 16.0% instead of 15.7% as originally reported. Exports were revised down, dropping 23.6% instead of falling 19.7%. Trade reduced GDP by 0.46 of a percentage point in the fourth quarter. Originally, trade was seen adding 0.09 of a percentage point to GDP.

Businesses decreased spending more than previously thought. Outlays fell by 21.1% October through December, lower than the originally estimated 19.1% decrease. Business spending fell 1.7% in the third quarter. Fourth-quarter investment in structures decreased 5.9%. Equipment and software plunged 28.8%.

Fourth-quarter spending by consumers tumbled 4.3%, down from a previously reported 3.5% decrease and below the third quarter’s 3.8% decline. Consumer spending accounts for about 70% of economic activity.

Canada’s Q4 GDP report is scheduled to be released on Monday.

IE