Feb. 27 (Bloomberg) -- The U.S. economic contraction in the fourth quarter was deeper than the government first estimated, with other reports today signaling little prospect of relief until at least the middle of 2009.
Gross domestic product shrank at a 6.2 percent annual pace from October through December, the most since 1982, the Commerce Department said today in Washington. Separate figures showed consumer sentiment and business activity dropped this month.
“There has been no evidence that the pace of decline is slowing at all,” Bill Cheney, chief economist at John Hancock Financial Services Inc. in Boston, said in an interview with Bloomberg Television. President Barack Obama’s $787 billion stimulus package will “kick in” in mid-2009 at the earliest, he said.
Consumer spending, which slid the most in almost three decades last quarter, is unlikely to turn around as companies from General Motors Corp. to JPMorgan Chase & Co. cut payrolls. The credit crunch shows no sign of ending, with the government today forced to come to the rescue of Citigroup Inc. for a third time in five months after mounting losses at the lender.
Stocks declined for the ninth time in 10 days, with the Standard & Poor’s 500 Stock Index falling 2.4 percent to close at 735.09. in New York. Treasuries fell for a fourth day amid concern over the ballooning cost of federal efforts to halt the crisis.
Slump Deepens
The Institute for Supply Management-Chicago Inc.’s barometer showed business activity contracted in February for a fifth consecutive month, while the Reuters/University of Michigan consumer sentiment index fell for the first time since November.
U.S. GDP was previously estimated to have declined by 3.8 percent last quarter. The 2.4 percentage-point revision was almost five times as large as the average adjustment, the Commerce Department said. The median forecast of 74 economists surveyed by Bloomberg News was for a 5.4 percent decline. more...
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