Economy's tumble in the summer worse than first thought as consumers slash spending

Economy's tumble in the summer worse than first thought as consumers slash spending

The updated reading on the economy's performance, released Tuesday by the Commerce Department, showed the gross domestic product shrank at a 0.5 percent annual rate in the July-September quarter.
That was weaker than the 0.3 percent rate of decline first estimated a month ago, and marked the worst showing since the economy contracted at a 1.4 percent pace in the third quarter of 2001, when the nation was suffering through its last recession.
American consumers -- the lifeblood of the economy -- slashed spending in the third quarter at a 3.7 percent pace. That was deeper than the 3.1 percent cut initially reported and marked the biggest reduction since the second quarter of 1980, when the country was in the grip of recession.
Consumers are hunkering down amid job losses, tanking investment portfolios and sinking home values, which are making them nervous about spending.