U.S. Economy Contracts Most Since the 2001 Recession (Shobhana Chandra)

Created by : Francis Goodwin View profile

Oct. 30 (Bloomberg) -- The economy suffered its biggest decline since 2001 in the third quarter, ushering in what may be worst recession in a quarter century and boosting the chances of Barack Obama and his fellow Democrats in next week's elections.

Gross domestic product contracted at a 0.3 percent annual pace, less than forecast, a Commerce Department report showed today in Washington. The last major economic data before the election also showed that a record two-decade consumer spending boom ended last quarter as the credit crunch deepened.

``The crisis really kicked up in late September,'' Ethan Harris, co-head of U.S. economic research at Barclays Capital Inc. in New York, said in a Bloomberg Television interview. ``We're going to be looking at a very unfriendly GDP number in the fourth quarter, with a drop of 2 to 4 percent.''

The economic slump coincided with Democratic presidential nominee Obama's lead in public-opinion polls. A Bloomberg/Los Angeles Times survey taken Aug. 15-18 showed Republican nominee John McCain with 42 percent support to Obama's 41 percent; five weeks later, as the credit crunch deepened, the poll showed Obama leading by 49 percent to 45 percent.