U.S. Economy Shrinks 3.8 Percent In Fourth Quarter

Markets are down today after a Commerce Department report that the U.S. economy shrank at an annual rate of 3.8 percent in the last three months of 2008.

The Commerce Department said the gross domestic product, the widely followed measure of the economy, shrank at a 3.8 percent pace in the final three months of the year. That compared with a 0.5 percent decline in the previous quarter.

Friday's reading was much better than the 5.4 percent drop economists expected. Still, the figure could be revised lower in the months ahead — and some analysts believe the economy has been contracting in early 2009 at an even faster pace.

Mixed earnings reports added to the market's uncertainty.

Exxon Mobil Corp. last year surpassed its own record for annual earnings by a U.S. company, but saw a big drop in profit during the fourth quarter. Chevron Corp.'s fourth-quarter results also suffered from the late-2008 plunge in oil prices.

And consumer-products company Procter & Gamble Co. said that while fourth-quarter quarter profit jumped 53 percent after selling its Folgers coffee business, sales dipped 3 percent on weakening demand for its products — which include Tide detergent, Olay skin cream and Crest toothpaste.

Declining sales are also hitting Honda Motor Co. hard — the Japanese automaker slashed its 2009 profit target by more than half as its earnings dropped 90 percent in the latest quarter.