U.S. economy shrinks 3.8% in Q4

The U.S. economy turned in its worst performance in 26 years in the fourth quarter but actually did better than Wall Street had expected, according to figures released Friday.

American gross domestic product, the broadest measure of a country's national income, fell by 3.8 per cent in the final three months of the year. That result represented the worst quarterly showing since the first three months of 1982 when the economy shrank by 6.4 per cent.

But economists had expected the United States to turn in an even worse performance, as they had forecast a contraction of 5.5 per cent in the October-to-December period.

Nonetheless, the fourth quarter's awful showing represented the second quarter in a row in which the U.S. economy lost ground. GDP contracted by 0.5 per cent in the July-to-September period of 2008.

For the year, RBC Economics was expecting the U.S. economy to grow marginally, up 1.1 per cent in 2008.

With all signs pointing downward, economists figure the country's financial fortunes will not be improving any time soon.

"As we head into 2009, the U.S. economy continues to plunge like an aircraft that has lost all lift," said Wells Fargo & Co., a U.S.-based bank specializing in the real estate market, in an earlier commentary on American economic prospects.

Wells Fargo is forecasting that U.S. GDP will shrink by 4.6 per cent in the first quarter of 2009 and 1.3 per cent in the second three-month period.