A U.S. government report released Friday shows that output in the U.S. economy fell at a faster pace in the October to December quarter than previously reported. Gross domestic product fell at more than a six percent rate.
It was the worst quarterly performance for the U.S. economy in 26 years. Output declined at a 6.2 percent rate in the October to December period. Last month the government agency that collects economic data said the 4th quarter decline was a more modest 3.8 percent. The figures will be revised again next month as more data becomes available.
Economists are divided as to whether the pace of output shrinkage is accelerating or stabilizing. The 4th quarter pace of decline was more severe than what most forecasters expected. John Silvia, chief economist at Wachovia Bank, says the fourth quarter was likely the lowest point of the recession that began in December 2007.
"The fourth quarter was the worst quarter in the recession," he said. "Each quarter going forward is probably going to be a smaller negative number. "
Silvia bases his relative optimism on the likely impact of increased government spending that is intended to cushion the economic decline and stimulate recovery.
"I would say that in the private sector you're probably going to have [continued] recession," he said on Bloomberg Television. "It's only the government spending that is really going to get you positive GDP numbers, probably by the fourth quarter of this year."
For all of 2008 the U.S. economy registered a 1.1 percent advance, due mainly to significant growth in the second quarter of the year. An overall decline is expected for 2009.
Bad as the U.S. numbers are, they are even worse in Japan. The Japanese economy - the second biggest - is contracting at a 10 percent rate in the latest period. The global downturn is impacting all of the major industrial economies with Europe, North America and Japan all registering output shrinkage. Leaders of nations comprising 80 percent of global output, the Group of 20, will meet April 2 in London to discuss coordinated measures to lift the global economy out of its worst downturn in 60 years.