The U.S. economy contracted over the third quarter as Americans snapped their wallets shut in response to the nation's shaky financial markets, the Commerce Department reported this week.

Between July and September, personal consumption dropped by 3.1 percent, the largest decline since 1980, the report said. The downturn followed similar declines in the second quarter, when spending fell by 1.2 percent.

Slumping consumer spending pulled GDP down by 0.3 percent for the quarter, compared to a 2.8 percent increase over the second quarter, the report said.

sales of durable goods were the hardest hit, falling 14.1 percent, while sales of nondurable goods fell by 6.4 percent.

The report said the advance figures are subject to revision and are likely influenced by hurricanes Ike and Gustav earlier this year. A more comprehensive third-quarter report will be released on Nov. 25.