MercoPress. South Atlantic News Agency

US economy recorded lowest growth in '08 since '01: 1.1%

The US economy shrank by 6.2% in the last three months of 2008, official figures have shown, a far sharper fall than had previously been reported. Plunging exports and the biggest fall in consumer spending in 28 years dragged the annualised figure down from an earlier estimate of 3.8%.

The decline was much worse than analysts had expected, sending US stocks spiralling lower on Friday. In 2008 as a whole, the economy grew by 1.1%, the slowest pace since 2001. Consequently the blue-chip Dow Jones industrial average dropped 119.15 points, or 1.66%, to 7,062.93. The broader Standard & Poor's 500 Index fell 2.36% to 735.09 - a 12-year low. Consumer spending, which accounts for about two-thirds of domestic economic activity, fell by a rate of 4.3% in the final quarter - the biggest fall since the second quarter of 1980. This was a revision of the earlier figure of 3.5%. With rising unemployment, sliding home values, increasing numbers of repossessions and the slumping value of investments, observers say many US consumers are hanging on to whatever disposable cash they have. Meanwhile, exports - which had until recently been supporting the economy - fell at the sharpest rate since 1970 at an annual rate of 23.6%, down from 19.7%. Earlier this week, Federal Reserve chief Ben Bernanke warned Congress that without the right policies from the government, the US recession could last into 2010. But he said if the Obama administration and the central bank can restore some measure of financial stability, 2010 could be a year of recovery. President Obama recently signed a 787 billion US dollars recovery package of increased government spending and tax cuts, and unveiled a 75bn scheme to stem repossessions.