Consumers sharply cut spending

WASHINGTON (AP) — Let the economists debate all they want. This is a recession.

Scared and often broke, Americans stopped buying everything from cars to corn flakes in the July-September quarter, cutting back spending by the largest amount in 28 years and jolting the national economy into what could be the most painful downturn in decades.

Analysts will be studying the figures for months before confirming the meltdown recession of 2008. But the result is no longer in doubt.

With retailers bracing for a grim holiday buying season, the economy isn’t just slowing; it’s actually shrinking, the government said Thursday. It reported that the nation’s gross domestic product declined at an annual rate of 0.3 percent in the year’s third quarter and consumers’ disposable income took its biggest drop on record.

In simpler words, “The train went off the tracks,” said Brian Bethune, economist at IHS global Insight.

Wall Street took comfort in the fact that it wasn’t even worse. The Dow Jones industrials rose 190 points.

But it looks as if tougher times are still ahead. Economists believe consumers are cutting back even more right now, and they predict a much larger economic decline — anywhere from a 1 percent to 2 percent rate — during the current October-December period. That would meet a classic definition of a recession — two straight quarters of shrinking GDP.

Clobbered by pink slips, shrinking nest eggs and falling home values, consumers are holding ever tighter to their wallets. The new report said Americans’ disposable income fell at an annual rate of 8.7 percent in the quarter, the largest in records dating back to 1947.

The dismal news came just days before the nation picks the next president. Both Democrats and Republicans said the new figures supported their political case.