The U.S. economy contracted at a 0.3% annualized rate in the third quarter, as consumer spending declined at the fastest rate in 28 years, the Commerce Department estimated Thursday.

The 0.3% decline in real gross domestic product was the largest since the end of the last recession in late 2001. The economy grew at a 2.8% pace in the second quarter.

The drop was close to economists' expectations that the economy would shrink at a 0.5% annual rate.

Final sales to domestic purchasers fell 1.8%, the largest decline in 17 years. Consumer spending dropped 3.1%, the first decline in 17 years and the biggest drop in 28 years, while business investment fell 1%. Investments in homes fell for the 11th straight quarter.

After getting a big boost from the tax rebates in the second quarter, inflation-adjusted after-tax incomes fell 8.7%, the largest quarterly decline since the record-keeping began in 1947. Incomes fell much more in the Great Depression, when annual records were kept.

The growth figures would have been much worse without sizable positive contributions from government spending, net exports and inventories.

GDP has risen 0.8% in the past year.

Economists expect the economy to contract in the final three months of this year and the first three months of next year, with unemployment rising to near 8%. It would be the longest contraction since World War II.

Full details at MW

The Dow wobbled up a lame 50 pts, however the futures had already regained from last night's close of death, largely on the back of very strong profits from Exxon and Shell.

We shall see whether we get a sustainable rally.