Rich Miller and Shobhana Chandra
Thursday, Oct 30, 2008
The economy suffered its biggest decline since 2001 in the third quarter, ushering in what may be the worst recession in a quarter-century and boosting the chances of Barack Obama and fellow Democrats in next week’s elections.
Gross domestic product contracted at a 0.3 percent pace from July to September, according to a Commerce Department report today in Washington. The decline was smaller than forecast and stocks rose. Even so, the economy may be in for a larger drop this quarter after the record two-decade expansion in consumer spending came to an end.
“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.”
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The weak economy has been bad news for Republican presidential candidate Senator John McCain, who’s fallen further behind Illinois Senator Obama as the credit crisis intensified. A Bloomberg/Los Angeles Times survey taken Aug. 15-18 showed McCain with 42 percent support to Obama’s 41 percent; five weeks later, the poll showed Obama leading 49 percent to 45 percent.
“The economy is playing very well for the Democrats, especially since the financial shock hit,” said Daniel Clifton, head of policy research for Strategas Research Partners in Washington. “People just got scared.”
Stocks, which were up in futures trading earlier in the day, remained higher after the GDP report. The Standard & Poor’s 500 Stock Index rose 0.8 percent to 937.3 as of 11:38 a.m. in New York. Benchmark 10-year Treasury note yields rose to 3.91 percent from 3.86 percent late yesterday.