Economists Forecast 5 To 6 Percent GDP Contraction In 2008 Q4

January 30, 2009 5:49 a.m. EST

Washington, D.C. (AHN) - The numbers all point to the same direction - downward. The American economy is on a downhill road. Recent reports of high unemployment rates, low sales of new homes and a drop in retail sales will be summarized into a single digit in the form of the fourth quarter gross domestic product growth rate to be released Friday by the Commerce Department.

Economists are forecasting the GDP growth rate to have contracted by 5 to 6 percent for the three-month period October to December 2008. If their prediction will be correct, it will be the worst quarter for the U.S. economy since 1982.

Whatever is the preliminary report, it will not surprise Americans who have been experiencing first hand the negative impact of the global financial crisis on a personal level. Ben Herzon, senior economist of Macroeconomic Advisers, who said the GDP growth rate will likely be negative 5.5 percent, told USA Today, "It's going to confirm what we already know, and that is we're in a severe recession."

Friday's release of Q4 data was preceded by bad economic news. The Dow Jones industrial average plummeted 226.44 points or 2.7 percent on Thursday, the number of people receiving unemployment benefits increased by 159,000 last week to 4.78 million, while number of new homes sold dipped 15 percent in November.

Herzon pointed out the Q4 result indicates the last three months of 2008 were one of the most severe recessionary periods since the Great Depression. 3M chief executive George Buckley said in a conference call, "The fourth quarter... was different from any pattern we've ever seen before, the synchronization of the world's economy in simultaneous contraction... Weak business conditions for consumer confidence and psychological fear factor made it worse."