WASHINGTON - The economy took a tumble in the summer that was worse than first thought as American consumers throttled back their spending by the most in 28 years, further proof that the country is almost certainly in the throes of a painful recession.
"Consumers and businesses were like deer in the headlights ... frozen," said economist Ken Mayland, president of ClearView Economics.
The updated reading on the economy's performance, released Tuesday by the Commerce Department, showed that the gross domestic product shrank at a 0.5 percent annual rate in the July-September quarter.
That was weaker than the 0.3 percent rate of decline estimated a month ago, and marked the worst showing since the economy contracted at a 1.4 percent pace in the third quarter of 2001, when the nation was suffering through its last recession.
GDP measures the value of all goods and services produced within the U.S. and is considered the best barometer of the country's economic fitness.
Elsewhere, the New York-based Conference Board said its Consumer Confidence Index for November rose to 44.9, from a revised 38.8 in October. Last month's reading was the lowest since the research group started tracking the index in 1967.
U.S. consumers slashed spending in the third quarter at a 3.7 percent pace. That was deeper than the 3.1 percent cut initially reported and marked the biggest reduction since the second quarter of 1980, when the country was in the grip of recession.
The report showed that disposable income fell at an annual rate of 9.2 percent in the third quarter, the largest drop since record-keeping began in 1947.
The new reading on GDP underscores just how quickly the economy deteriorated as housing, credit and financial crises intensified. The economy logged growth of 2.8 percent in the second quarter.
White House press secretary Dana Perino called the lower GDP figure "troubling" and said government efforts announced Tuesday to boost the availability of auto and student loans, credit cards, home loans and other consumer lending -- at cheaper rates -- should eventually help spur more consumer spending.