Although third-quarter figures were no worse than expected for the American economy, there are fears the final quarter will be much worse as consumers and businesses cut spending.
The turnaround to a half percent contraction in GDP comes after the second quarter’s near three percent jump, although that was fuelled by President Bush’s tax rebates. It is still the biggest quarterly drop since after the September 11th attacks in 2001. America is now in recession, and some analysts are suggesting the final quarter will see a six percent contraction. Company profits recorded their seventh decline in the last eight quarters, and capital investment has all but dried up. “The size of the budget deficit, whatever the number is, I can’t predict if it’s gong to be a trillion or something less than that, it’s going to be large. And you know, it’s going to be a very significant number. I think it will reflect two things. One’s the downturn in the economy, and the slowing receipts coming into the federal government,” is one typically gloomy view from an analyst. Moreover, with over half a million jobs lost in November alone it is going to take a lot of yo-ho- hoing to raise spirits both on Wall street and Main street this Christmas.