The U.S. economy contracted 0.4% in the third quarter, shrinking for the first time in 8 years, the Commerce Department said Wednesday. The decline in gross domestic product was largely due to a sharp deceleration in consumer spending and smaller investments in housing. Consumer spending rose 1.2%, the slowest pace in 8 years. Capital spending by businesses declined at double-digit rates again, while government spending rose modestly. Both exports and imports plunged. Inventories continued to shrink. Final sales of domestic products -- which includes everything but inventories -- was flat. Inflation declerated, with pro forma prices for personal consumption expenditures up 0.8%. Economists had expected a much larger drop of 1.1% in the quarter. They see GDP falling 1.7% in the current quarter.
