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US economy contracted more than feared

28 February 2009 10:16 (UTC +04:00)

BAKU-APA-Economics. Economic output in the United States shrank more than feared during the last quarter of 2008, raising new questions on the country’s path to recovery.
On Friday, the U.S. Commerce Department revised its fourth-quarter gross domestic product reading downward, to a 6.2% drop. At the end of January, the government had initially reported a GDP contraction of 3.8%, but that figure was less severe than the 5.4% annualized contraction Wall Street had been predicting for the last three months of the year.
Friday’s reading was the worst since the 6.4% drop in recorded the first quarter of 1982, when the country was suffering a severe recession. This time around, the U.S. economy has been sucked into a housing, credit and financial conflagration that led to widespread job losses and a massive pullback in spending.
The government also reported that personal consumption fell by 4.3%, which was also below the 3.7% drop anticipated by Wall Street.
Friday’s report added insult to injury for the U.S. markets, which also had to had to also grapple with the news of Citigroup (nyse: C - news - people ) reaching a deal with the U.S. government, in which the Treasury would convert up to $25.0 billion in Citigroup preferred shares to common.