WASHINGTON — The economy shrank at a 3.8 percent pace at the end of 2008, the worst showing in a quarter century, as the deepening recession forced consumers and businesses to throttle back spending.
Although the initial result was better than economists expected, the figure is likely to be revised lower in the months ahead, and some think that in the current quarter the economy is contracting at a pace of around 5 percent. The January-March period, they said, will probably turn out to be the worst quarter for the recession.
American consumers and businesses cut back everywhere in the final three months of 2008. People chopped spending on cars, furniture, appliances and clothes. Businesses dropped the ax on equipment and software, home-building and commercial construction. And overseas sales of U.S.-made goods and services tanked as foreign buyers grappled with their own economic woes.
President Barack Obama called the accelerating downturn a "continuing disaster" for America's families.
The figure, released Friday by the Commerce Department, showed the economy sinking at a much faster clip in the October-December period than the 0.5 percent decline logged in the previous quarter.
"The downturn is intensifying. The fourth quarter is worse than it looks," said Mark Zandi, chief economist at Moody's Economy.com.
Gross domestic product is the value of all goods and services produced within the United States. It is considered the broadest barometer of the country's economic health.
A buildup in business inventories — which in calculating GDP adds to economic activity — masked the fourth quarter's weakness. Businesses couldn't cut production fast enough in response to waning demand and were stuck with excess inventories, economists explained.