Third Quarter GDP Growth Revised Down to -0.5 Percent

The Commerce Department Tuesday revised gross domestic product contraction in the third quarter of 2008 to -0.5 percent, a change that was slightly less severe than most economists had expected.

Commerce originally reported a GDP contraction of -0.3 percent in the third quarter. Economists polled by MarketWatch and Bloomberg expected today’s revision to show negative growth of 0.6 percent in the Q3.

The past four quarters has been a tumultuous time for GDP measurements, with wild swings from slightly negative to solidly positive.

In the third quarter of 2008, a near-historic slowdown in consumer spending was the main culprit in negative economic growth. Consumer spending contracted 3.7 percent in the quarter, the first drop in 17 years and the largest drop in 28 years.

Investments in housing, businesses, equipment and software all were a drag on growth in the third quarter.

Some of the few bright spots in the economy included an increase in business inventories and a sharp upswing in government spending.

Economists are predicting further economic contraction in the fourth quarter, which ends Dec. 31. A MarketWatch poll shows economists anticipating an average contraction in the quarter of 3.5 percent.