As expected, U.S. real gross domestic product fell at a 0.5 percent annualized rate during the third quarter, unrevised from a previous estimate, according to the Commerce Dept. Tuesday morning. GDP is a measure of all products, goods and services produced in the economy, and a negative GDP reading signals economic contraction. While the unrevised number was largely expected, it represents the largest quarterly decline in GDP since Q3 2001; most expect fourth quarter GDP numbers to be one of the worst on record, perhaps falling as far as 6 percent annualized, according to the Wall Street Journal. Economists at the National Bureau of Economic Research said Dec. 1 that the U.S. has been in a recession since December 2007; the group is the official body for dating the nation’s recessionary cycles. Obviously, for mortgage markets, an economy in the dregs typically means two things: more foreclosures, and low mortgage rates. On the former’s account, we’re clearly setting ourselves up for a surge in foreclosures during early 2009, according to most available data; in regards to the latter, rates have remained near historic lows, according to a study or mortgage rates released Tuesday morning by Zillow’s Mortgage Marketplace. The online real estate information provider said that many states saw sub-5.00 percent rates for the first time in recent history; weekly average rates for 30-year fixed mortgages declined to 4.96 percent, down from 5.15 percent the week prior, the company said in a statement. Residential fixed investment — a component of GDP component that includes spending on housing — dropped by a whopping 16.0 percent in the third quarter, reflecting ongoing troubles in the U.S. housing market. The drop was lower than earlier estimated, however; residential fixed investment had been estimated to fall 17.6 percent during Q3. Of course, the single largest component of GDP is consumer spending; and the data released Tuesday showed that third quarter spending by consumers fell 3.8 percent, far outpacing the 1.2 percent drop recorded during Q2. While economic contraction appears set to continue at least through the middle of next year (if not longer) it appears that, for the time being at least, the inflation beast has been kept mostly in its cage. After concerns about inflation flared earlier this year in response to skyrocketing commodity prices, the Commerce Dept. reported that Q3 numbers showed that so-called “core inflation” — that’s prices excluding food and energy — increased at a 2.4 percent rate during the quarter, down slightly from the 2.6 percent originally estimated. The government’s total price index, including food and energy, rose 5.0 percent, below the originally-estimated 5.2 percent increase; that total, however, was still well above the 4.3 percent gain recorded during Q2. MarketWatch‘s Irwin Kellner is among those that believe the longer-term threat to the U.S. economy remains inflation, a viewpoint we tend to share here at HousingWire. More than a few analysts have been focused in the short-term on the effects of possible deflation, as home prices continue to fall. “While virtually no one is raising prices in today’s depressed economy, all this liquidity will soon become an accident looking for a place to happen,” he writes in a column published Tuesday. “The trick then, for the Fed, is to drain this excess liquidity before it turns into inflation. “This is easier said than done, because the Fed will have to begin weaning us off easy money long before the recession ends. By the way, this could happen sooner than you think.” Write to Paul Jackson at paul.jackson@housingwire.com.