US economic output slumps
Obama has urged congress to pass the
latest economic stimulus package [AFP]
The United States economy shrank at a rate of 3.8 per cent in the fourth financial quarter of 2008, formally plunging the country into recession, the US government has said.
The figure marked a sharp drop compared to the third financial quarter, in which the growth rate fell by only 0.5 per cent, the commerce department said on Friday.
However, in 2008 as a whole, the US economy grew 1.3 per cent, with total output of goods and services of $14.26 trillion. Analysts said the fourth quarter results were not as bad as feared.
The US has been in recession since December 2007, the National Bureau of Economic Research, a private research group, said last month, even though up until now the economy had not shown two consecutive quarters of decline.
US stocks fell in midmorning trading after an initial rally, with the Dow Jones Industrial Average falling 48.91 points or 0.60 per cent, to 8,100.10 points.
The report comes a day after the labour department said 4.78 million US citizens were now claiming unemployment funds up to the week ending January 17, the highest level since records began in 1967.
It also follows the approval by the house of representatives of an $819bn economic stimulus package backed by Barack Obama, the US president, despite stiff opposition from Republicans. The bill now passes to the senate.
'Continuing disaster'
Obama said on Friday that the poor figures showed the "continuing disaster" for US families and urged the senate to act swiftly on the stimulus bill.
"The recession is deepening, and the urgency of our economic crisis is growing,'' Obama said at the White House on Friday.
"What we can't do is drag our feet or delay much longer. The American people expect us to act, and that's exactly what I intend to do as president of the United States."
Obama also unveiled a new White House task force on the problems of middle-class Americans, and installed Joe Biden, the US vice-president, as its chairman, with its first priority set as the development of environmental or "green" jobs.
And he signed a series of executive orders giving new rights to union members and people who work for government contractors.
Failing economy
The report provided the latest evidence of the US economy's rapid deterioration as
the housing, credit and financial crises continue to weaken the country's finances.
It showed consumer spending, which accounts for two-thirds of US economic activity, falling 3.5 per cent in the fourth quarter after declining 3.8 per cent in the third quarter.
The slumps mark the first consecutive drops since the last quarter of 1990 and the first quarter of 1991.
In addition, spending on durable goods such as cars and furniture plunged 22.4 per cent, the steepest decline since the first quarter of 1987.
And investment by business slumped 19.1 per cent in the sharpest fall since the first quarter of 1975, with residential investment also falling 23.6 per cent.
Source: Agencies
