According to US Economy Preview report, the worst credit crisis since the Great Depression sent the US economy into a tailspin at the end of 2008 as consumers and businesses retrenched. As per report, gross domestic product contracted at a 5.5% annual rate from October through December 2008, the biggest drop since 1982.

Mr Brian Bethune director of financial economics at IHS Global Insight in Lexington said that "The recession entered a more negative and pernicious phase in the fourth quarter. It is potentially the worst recession that we’ve seen in terms of the severity and the depth."

After starting in housing, the recession has spread to households. Consumer spending, the largest part of the economy, is forecast to have dropped at a 3.5 percent pace last quarter after slumping at a 3.8 percent rate the previous three months. It would be the first time purchases declined more than 3 percent in consecutive quarters since records began in 1947.

Mr H Lee Scott CEO of Wal Mart Stores Inc said on January 12th 2009 that the first half of 2009 will be extraordinarily challenging. He added that "Some people are giving up eating out; some people are giving up movies, some people are giving up other things like shopping. Those are fundamental changes that will continue."

Mr Dean Maki co head of US economic research at Barclays Capital Inc said that "The case for credit easing remains intact and we expect the Fed to continue to pursue this policy aggressively in coming months."

Consumers are losing confidence and retrenching as the labor market weakens. The US lost 2.6 million jobs in 2008, the most since 1945. The unemployment rate climbed to 7.2% in December 2008, the highest in almost 16 years.

(Sourced from www.bloomberg.net)