Decline Signals Recession

The economy went into reverse in the third quarter of 2008, as consumers reduced spending by the largest amount in 28 years.

It is a strong signal that the U.S. has moved into a recession. The Commerce Department reported that the gross domestic product, the main indicator of national economic health, shrank at a 0.3 percent annual rate in the July-September quarter. This was the worst showing since the economy contracted at a 1.4 percent pace in the third quarter of 2001, when the nation was last in recession.

This GDP reading indicates a loss of traction for the economy, which experienced 2.8 percent growth in the previous quarter. The sharp reversal will strengthen the belief by many economists that the nation is in a significant downturn. In particular, the decline marked a retreat by consumers, whose spending accounts for two thirds of GDF.

Consumers decreased spending 3.1 percent in the third quarter, the most since 1980, when the country was in one of the worst recessions since the 1930s.