Consumers signal bad recession

While consumers led the way, nearly every sector contributed to the economy’s decline in the third quarter, according to the department. Housing construction fell by 19 percent, for its 10th straight double-digit quarterly loss. Businesses cut spending on equipment and software by 5.5 percent, suggesting they are slimming down rather than expanding.

The economy’s summer swoon preceded the even more turbulent period this fall that analysts believe has thrown the economy into an even deeper slump. Some expect the downturn in consumer spending to continue next year.

“We are now entering the harshest part of the recession,” said Nigel Gault, an economist at Global Insight. “The economy ended the third quarter much weaker than it began, even before the most extreme turmoil in global financial markets erupted in October.”

Global Insight is predicting a deep contraction of 3 percent in the economy during the fourth quarter. Mr. Gault noted that a big surge in defense spending helped prop up growth during the summer, and that will not repeat at the end of the year.