GDP Worse Than Expected in Third Quarter

By Jeanine Aversa

WASHINGTON -- The economy took a tumble in the summer that was worse than first thought, as American consumers throttled back their spending by the most in 28 years, further proof the country is almost certainly in the throes of a painful recession.

The updated reading on the economy's performance, released Tuesday by the Commerce Department, showed gross domestic product shrank at a 0.5% annual rate in the July-September quarter.

That was weaker than the 0.3% rate of decline first estimated a month ago, and marked the worst showing since the economy contracted at a 1.4% pace in the third quarter of 2001, when the nation was suffering through its last recession.

GDP measures the value of all goods and services produced within the U.S. and is considered the best barometer of the country's economic fitness.

The new reading on GDP underscores just how quickly the economy deteriorated as housing, credit and financial crises intensified. The economy logged growth of 2.8% in the second quarter.