US economy shrinks in Q3

US economy shrinks in Q3 WATCH VIDEOSource: CCTV.com 10-31-2008 11:09 Special Report: Global Financial Crisis The US economy shrank in the summer, the strongest signal yet that a recession may have already begun. The report came a day after the Federal Reserve slashed a key interest rate to battle an economic downturn. The Commerce Department reported that the gross domestic product, the broadest measure of economic health, fell at an annual rate of 0.3 percent in the third quarter. This is a significant slowdown after growth of 2.8 percent in the prior quarter. Spring activity had been boosted by the 168 billion dollars economic stimulus program, but the economy ran into a wall in the summer as the mass mailings of stimulus checks ended, and consumer confidence was shaken by the upheavals on global markets. Consumer spending, which accounts for two-thirds of the economy, dropped by the largest amount in 28 years in the third quarter. Michael Santoli, Associate Editor of Barron's Magazine said "Economic output went down once adjusted for inflation. I think the most telling aspect of the GDP report was the consumer spending retrenchment obviously about a three percent annualized reduction in consumer outlays that really shows a dramatic behaviour change. Obviously, the credit crunch is stressing consumer finances, but also it seems as if people to some degree are proactively cutting back on what they spend." The classic definition of a recession is two consecutive quarters of negative GDP. Many analysts believe the GDP will decline in the current October to December period by an even larger amount, and they are forecasting a negative GDP figure in the first three months of next year. The prospects for the US economy remain uncertain. Thanks to a series of government measures, the stagnancy of the credit market seems to have eased a bit. At present, how to prevent the economy from falling into deep recession is what US authorities are confronted with.

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YouTube | October 31, 2008

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