The US economy shrank at an annual rate of 6.3 percent in the final quarter of 2008, with economists predicting a 5-6 percent annualized drop for the current quarter, the Commerce Department reported on Thursday.

The US economy fell 0.5 percent in the third quarter of 2008.Analysts had expected an even deeper decrease of 6.5 percent for the fourth quarter.

A previous report released a month ago had estimated a 6.2 percent drop in 2008's fourth quarter.

"The decrease in real GDP in the fourth quarter primarily reflected negative contributions from exports, personal consumption expenditures, equipment and software, and residential fixed investment that were partly offset by a positive contribution from federal government spending," the department said.

The department also said: "Imports, which are a subtraction in the calculation of GDP, decreased."

According to the report, consumers cut their spending at a 4.3 percent rate in the fourth quarter, the same as previously estimated. It was the biggest decline in spending since the second quarter of 1980.

Business spending on equipment and software plunged 28.1 percent in the final three months of last year, the department reported. That was slightly better than the 28.8 percent drop reported earlier.

Builders, meanwhile, slashed their spending on commercial construction projects by 21.7 percent, the most since the first quarter of 1975. Their spending on residential projects dropped by 22.8 percent.

Exports of goods in the October-to-December period decreased by 32 percent, compared with a 33.6-percent plunge previously estimated.

Federal government spending rose 7.0 percent in the quarter, much smaller than the 13.8 percent rise in the third quarter.

Looking ahead, economists believe that consumers and businesses will keep cutting back their spending and the economy will continue to decline in the first six months of this year.

Many economists are projecting an annualized drop of between 5 percent and 6 percent for the current quarter.

For all of 2008, the US economy grew by just 1.1 percent, compared with a 2.0 percent growth in 2007, marking the weakest showing since 2001.

The slowdown in economic growth in 2008 primarily reflected a sharp deceleration in consumer spending, a downturn in equipment and software, and decelerations in exports and in state and local government spending, according to the Commerce Department.

(Xinhua News Agency March 27, 2009)