From The Times
December 24, 2008

US economy shrinks at fastest rate since 9/11
Christine Seib in New York

The US economy shrank at its fastest pace in the third quarter since the aftermath of the attacks of September 11, 2001, figures released yesterday showed.

The Commerce Department said that gross domestic product (GDP) declined by 0.5 per cent in the three months from July to September. This is the sharpest fall since the third quarter of 2001, in which America reeled from the 9/11 terrorist attacks. GDP then fell by 1.4 per cent.

Analysts believe that GDP has fallen even faster in the final quarter of this year and could decline by as much as 6 per cent in the three months from October to December. This would be the biggest fall since a 6.4 per cent plunge in the first quarter of 1982.

The National Bureau of Economic Research (NBER) said last month that the United States fell into recession in December 2007. As well as the usual rule that two consecutive quarters of falling GDP equals a recession, the NBER takes into account data such as job losses. Employment has fallen every month since last January, with the unemployment rate now at a 15-year high of 6.7 per cent.

GDP fell by 0.2 per cent in the fourth quarter of 2007 before rising for two consecutive quarters, going up 0.9 per cent in the first quarter and 2.8 per cent in the second quarter.

Nariman Behravesh, chief economist at IHS Global Insight, the economics consultancy, predicts that GDP will fall by 4 per cent in the first quarter of 2009. “Assuming that the incoming Obama administration does enact [its] $850 billion financial stimulus package quickly, it will do little to stop real GDP growth from dropping like a stone in the first half of 2009 but could help turn things around in the second half and provide a basis for sustained growth in 2010,â€