WASHINGTON — Let the economists debate all they want. The evidence shows that this is a recession.
Scared and often broke, Americans stopped buying everything from cars to cornflakes 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 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.
"The train went off the tracks," said Brian Bethune, economist at IHS Global Insight.
Moody's Economy.com said that 30 states and 276 metropolitan areas are well into a recession.
"Alaska and the District of Columbia are the only states expanding. What started in housing has now become a more broad-based slowdown: Financial market turmoil is weighing on businesses' ability to finance operations, and weak domestic demand and near recession-like conditions globally have brought the economy to its knees," the Moody's Economy.com report said.
Somehow, Wall Street took comfort in the fact that it wasn't worse, and the Dow Jones industrials rose 190 points.
It certainly looks as if tougher times are ahead, though. Economists believe that 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.
More than in recent recessions, consumers -- the lifeblood of the economy -- are bearing the brunt of the country's housing, banking and other ailments. The third-quarter decline in their spending was the first in 17 years, and the 3.1 percent annualized cutback was the most since the spring of 1980, when the country was in the grip of what some call the worst downturn since the Great Depression.
Walloped by such a huge pullback, the economy toppled into negative territory.
"We never like to see a negative number, and we were expecting a difficult quarter, and that's what we're looking at," said Commerce Secretary Carlos Gutierrez. He said he expects the weak economic data to fuel further calls for a second economic stimulus plan.
Democrats on Capitol Hill are pushing for such a package and are weighing whether to hold a lame-duck session before the new president takes office.
But Gutierrez warned that many of the public works projects that are being touted wouldn't offer immediate relief.
"We believe if you are going to call something a stimulus package it should be something that has immediate impact on the economy," he said.
The latest reading on GDP, which measures the value of all goods produced within the United States, showed a rapid turn from the 2.8 percent growth rate logged in the second quarter. The new figure was the worst since the 1.4 percent rate of decline in the third quarter of 2001, when the nation was weathering its most recent recession.
Federal Reserve Chairman Ben Bernanke, who has steered massive interest-rate cuts to try to stimulate lending and get the economy going, has warned that the economic weakness could last for some time, even if the government's $700 billion bailout...
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