WASHINGTON — As the longest recession in a quarter century intensifies, analysts believe the small decline in economic activity in the third quarter has worsened significantly in the current fourth quarter.
The Commerce Department said Tuesday that the gross domestic product, the broadest measure of economic health, declined at an annual rate of 0.5 percent in the July-September quarter. Corporate profits fell 1.2 percent.
Some economists believe the economy’s decline in the October-December period could be as large as 6 percent. If so, that would be the worst quarterly drop since 1982.
“It will get a lot worse before it gets better,” said Nariman Behravesh, chief economist at IHS Global Insight, a Lexington, Mass., forecasting firm. “We are in the midst of the worst recession in the postwar period, even factoring in a massive stimulus program.”
GDP is likely falling at a sharper pace in the current quarter because of widening fallout from the worst financial crisis to hit the country since the Great Depression. If GDP did plunge as much as 6 percent in the fourth quarter, it would be the sharpest quarterly decline since a 6.4 percent drop in the first quarter of 1982.
Many economists think this quarter could mark the low point of the recession, which is already the longest in a quarter century, having started last December.
Analysts are projecting that the huge plunge in GDP they expect in the current quarter will be followed by smaller declines in the first and second quarters of next year before the economy starts growing again next summer. If the recession ends in June, as many economists are forecasting, it will have lasted 18 months, making it the longest recession since World War II.
The Bush administration also said the country should be prepared for worse news to come.
“The fourth quarter, because of the credit crisis, the standstill in credit as markets froze up and the financial-market turmoil, will be significantly weaker,” presidential spokesman Tony Fratto told reporters at the White House on Tuesday.
