<font size=4>U.S. economy shrinks 1.1% </font>
November 30, 2001: 8:35 a.m. ET

Revised 3Q GDP weaker in worst performance since 1Q of 1991.

NEW YORK (CNN/Money) - The U.S. economy shrank at a faster pace in the third quarter than initially thought, the government said Friday, as the world's largest economy put in its worst performance in more than a decade.

U.S. gross domestic product (GDP), the broadest measure of economic health, shrank at a revised 1.1-percent annual rate in the third quarter, the Commerce Department reported. It was the worst quarter for GDP since it shrank 2.0 percent in the first quarter of 1991.

In its initial estimate of third-quarter GDP, the department said the economy shrank at a 0.4-percent pace after expanding at a 0.3-percent rate in the second quarter. Economists surveyed by Briefing.com expected third-quarter GDP to have shrunk by 0.8 percent.

"These numbers show the economy is, indeed, in recession and they leave the door open for the Fed to cut rates again," Gary Thayer, chief economist at A.G. Edwards & Sons, told Reuters.

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U.S. stock market futures showed little reaction to the data, pointing to a mixed open on Wall Street. U.S. Treasury bond prices were little changed.

To keep the economy from slipping into a recession, commonly defined as two straight quarters of shrinking GDP, the Federal Reserve has cut its target for short-term interest rates 10 times this year. Fed policy makers are widely expected to cut rates again after their meeting scheduled for Dec. 11.

Still, most economists have long thought a recession was inevitable, especially after the disruption of the Sept. 11 terror attacks. The National Bureau of Economic Research, which measures recessions and expansions in ways other than GDP, said this week that the economy entered a recession in March.

There were a few promising signs in the GDP report, including the fact that inventories were drawn down at a $60.1-billion rate during the third quarter, the sharpest for any quarter on record. That implies companies made significant progress in bleeding off bloated stocks of unsold goods. An overhang of such goods would hold up production gains once recession ends.

The major contributors to the decrease in GDP were exports and business spending. Consumer spending, which makes up two-thirds of GDP, rose 1.1 percent. Exports, which add to GDP, and imports, which subtract from GDP, both fell in the quarter.



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