The prospects for an economic recovery by year’s end dimmed yesterday, as government data showed that the economy contracted at the end of 2008 by the fastest pace in a quarter-century. The worse-than-expected data fueled doubts about whether the Obama administration had adequately sized up the challenges it faces in trying to pull the country out of recession.
Gross domestic product, a measure of the goods and services produced across the nation, shrank at an annualized rate of 6.2 percent in the last quarter of 2008, according to the Commerce Department, far worse than the initial estimate of 3.8 percent and the 5 percent most analysts were expecting. The downward revision means the economy began the year from an even weaker position than previously thought.
“The economy really doesn’t have any momentum going into the first quarter,” Wachovia economist John Silvia said. “To the extent the economy may have been weaker, then the impact of the stimulus would be more muted.”
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The Dow Jones industrial average tumbled 1.7 percent, or 119 points, capping a week in which stocks were battered by concerns that parts of the banking sector would be nationalized. Shares of Citigroup tanked 39 percent, to $1.50 after the government prepared to take a large ownership stake in the firm. Major indexes closed down about 4 percent on the week.
More than a year into the downturn, businesses are hunkering down. Technology and services conglomerate General Electric said yesterday that it would cut its annual dividend in July for the first time in at least 59 years to conserve cash and keep its borrowing costs as low as possible. Latham & Watkins, the nation’s fourth-largest law firm, said it would dismiss 190 lawyers and more than 250 paralegals and support staff.