WASHINGTON — The economy contracted at a staggering 6.2 percent pace at the end of 2008, the worst showing in a quarter-century, as consumers and businesses ratcheted back spending, plunging the country deeper into recession.
The Commerce Department report released Friday showed the economy sinking much faster than the 3.8 percent annualized drop for the October-December quarter first estimated last month. It also was considerably weaker than the 5.4 percent annualized decline economists expected.
A much sharper cutback in consumer spending, which accounts for about 70 percent of economic activity, along with a bigger drop in U.S. exports sales, and reductions in business spending and inventories all contributed to the largest revision on records dating to 1976.
Looking ahead, economists predict consumers and businesses will keep cutting back spending, making the first six months of this year especially rocky.
“Right now we’re in the period of maximum recession stress, where the big cuts are being made,” said economist Ken Mayland, president of ClearView Economics.
The new report offered grim proof that the economy’s tailspin accelerated in the fourth quarter under a slew of negative forces feeding on one another. The economy started off 2008 on feeble footing, picked up a bit of speed in the spring and then contracted at an annualized rate of 0.5 percent in the third quarter.
The faster downhill slide in the final quarter came as the financial crisis — the worst since the 1930s — intensified.
Consumers at the end of the year slashed spending by the most in 28 years. They chopped spending on cars, furniture, appliances, clothes and other things. Businesses retrenched sharply too, dropping the ax on equipment and software, homebuilding and commercial construction.
