US GDP shrinks most in 26 yrs; contracts 6.3% in Q4

The US economy contracted at a stunning pace of 6.3 per cent in the fourth quarter of 2008, the most in 26 years, as consumers cut down on spending and exports weakened.

The country's real GDP shrank by 6.3 per cent in the October-December period, the latest figures from the Bureau of Economic Analysis show.

The decline is higher than last month's official estimate of 6.2 per cent.

"Real gross domestic product - the output of goods and services produced by labour and property located in the US - decreased at an annual rate of 6.3 per cent in the fourth quarter of 2008," BEA said in a statement today.

The American GDP reportedly, has not shrunk as much since the first quarter of 1982. In the third quarter, real GDP dropped 0.5 per cent.

The recession in the world's largest economy deepened in the fourth quarter of 2008 in the wake of the financial meltdown, which saw the collapse of many financial institutions in addition to massive job losses. The economic situation turned worse last year after the bankruptcy of Lehman Brothers in September.

US officially entered into recession in December 2007.

For the full year 2008, the country's real GDP rose 1.1 per cent against 2 per cent in 2007.