The U.S. Commerce Department says the U.S. economy contracted at an annual rate of 0.5 percent between July and September, matching a previously-released initial estimate. Consumer spending and exports slumped, while corporate profits also declined.

White House spokesman Tony Fratto says the third quarter gross domestic product figure was not unexpected, and that the current quarter is almost certain to prove even grimmer.

"The fourth quarter we know, because of the credit crisis and the financial market turmoil, will be significantly weaker," he said. "We see that already in the monthly payroll data that has been reported. So it is a tough quarter. What we have been focused on is implementing the financial rescue package and the efforts of the Fed to restore growth, to free up credit so that the economy can get healthy again."

The United States is believed to have been in a recession since December of last year. During that time, U.S. unemployment has jumped a full percentage point.

The economic slowdown has led business to slash prices in hopes of kindling demand for goods and services. But consumers are not celebrating, according to Diane Swonk, chief economist for U.S.-based Mesirow Financial.

"Life is getting cheaper, but unfortunately jobs are getting more scarce. Also, those people who are working are finding that they have less money in their coffers," she said.

Many economists point to America's moribund housing market as a major contributor to the economic downturn. The Commerce Department is reporting more bad news on that front, with new home sales dropping nearly three percent in November to the slowest pace recorded in 17 years.

One bright spot for consumers is the continuing decline in fuel prices. Oil fell below $38 a barrel Tuesday, extending a dramatic slide in prices since the commodity peaked at nearly $150 a barrel in July.

"Even with OPEC having one of the biggest [oil] production cuts in history, not even that is enough to overcome the drop in demand due to the slowing global economy. And that is why these prices are so low," said energy analyst Phil Flynn.

Economic pain is not limited to the United States. Poland's unemployment rate has spiked above nine percent, prompting the country's central bank to cut interest rates for the second time in as many months.Most major financial markets saw light pre-holiday trading.

Tokyo and London closed modestly higher, while Hong Kong, Paris and Frankfurt recorded