Great news! GDP shrinks 3.8% in Q4

The final quarter of George Bush's presidency ended with the worst quarterly performance of our GDP since 1982, when Ronald Reagan was in office. Not since the first quarter of 1982, when GDP plunged at a 6.4% annualized rate, have we seen such dismal numbers.

But he 3.8% decline in Q4 2008 was not as bad as some had expected. What's next? Probably a downward revision of that 3.8% number, followed by a much worse result for 2009.

The key factor behind the shrinking economy was consumer spending, which shifted into reverse. Consumers cut back on spending by 3.5% in the fourth quarter, following a 3.8% reduction in the third quarter. Spending on durable goods, which generally requires financing to close the deal, plunged 22.4% -- the most since early 1987. And non-durable spending, or spending on items like food and clothing, fell 7.1% -- the deepest cut since 1950.