Economy in free fall in fourth quarter


Rex Nutting
MarketWatch
January 26, 2009

The U.S. economy contracted violently in the fourth quarter, with gross domestic product falling at its fastest pace in more than 25 years, economists said ahead of what promises to be a grim week of economic news.

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“Real economic activity fell off a cliff during the fourth quarter, producing a sharp drop in employment, output and spending,” wrote economists at Wachovia.

And the worst part is that it’s not over. Economists expect another huge decline in the first quarter, with a smaller contraction in the second quarter.

GDP is expected to have fallen at a 5.5% annualized rate in the final three months of last year, according to the median forecast of economists surveyed by MarketWatch. That would be the biggest decline since the 6.4% drop in early 1982 and one of the worst quarters in the post-World War II era.
The government will release its first estimate of fourth-quarter GDP on Friday, the culmination of a very busy week on the economic calendar. See Economic Calendar.

Other major releases will include durable-goods orders for December, home sales for December, and consumer confidence surveys for January.

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