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GDP shrank in third quarter as economy chilled

WASHINGTON (Reuters) - The economy shrank at a 0.5 percent annual pace in the third quarter as expected after consumers and businesses cut spending and the country’s recession gathered steam, government data showed on Tuesday.

The U.S. economy entered a recession last December which deepened after the failure of U.S. investment bank Lehman Brothers in September, which froze credit and sent households and firms into a defensive crouch.

“The past couple of quarters have been really weak and if anything, I’m afraid it may indicate a really bad fourth quarter,” said Kurt Karl, chief U.S. economist at Swiss Re in New York.