US Economy shrank at fastest clip since '82

The economy shrank at a 3.8 percent pace at the end of 2008, the worst showing in a quarter-century, as the deepening recession forced consumers and businesses to throttle back spending.

The new figure, released Friday by the Commerce Department, showed the economy sinking at a much faster clip in the October-December period than the 0.5 percent decline logged in prior quarter.

Although economists expected an even worse fourth-quarter performance — a staggering 5.4 percent rate of decline — the results were still grim.

The report provided clear evidence of the economy's rapid deterioration as the housing, credit and financial crises — the worst since the 1930s — feed on each other. It's a vicious cycle that has proven difficult for Washington policymakers to break.