* U.S. GDP shrank an unrevised 0.5 pct in 3rd quarter
* Reuters/U.Mich consumer survey 60.1 in Dec. vs 55.3
* Existing home sales down record 8.6 percent in November (Updates with market close, background)
By Alister Bull
WASHINGTON, Dec 23 (Reuters) - Sales of U.S. existing homes fell by a record amount last month as the recession picked up pace, although a collapse in gasoline prices gave consumer sentiment a rare lift, data showed on Tuesday.
"The bottom line: Bah humbug. Recession, recession, recession," said Jennifer Lee, an economist with BMO Capital Markets in Toronto.
The solitary good news came from the Reuters/University of Michigan Surveys of Consumers, which rose to 60.1 in December from November's reading of 55.3 due to lower energy and retail prices after stores made radical markdowns to tempt shoppers.
That trend was expected to continue, with the report noting more consumers expect price declines than in any other survey since 1960. It also points to deflation fears that have prompted the Federal Reserve to cut interest rates to almost zero.
The U.S. recession began last December and data from the Commerce Department confirmed analysts' expectations that output shrank at an annual rate of 0.5 percent in the third quarter as consumption and investment slumped.
Conditions are expected to get much worse before they get better, with the economy predicted to shrink by as much as 6 percent in the fourth quarter and keep declining for the next six months before a tepid recovery takes hold later in 2009.
"We are in the midst of the worst recession in the post-war period, even factoring in a massive stimulus program," said Nariman Behravesh, chief economist at IHS Global Insight.
Stocks tumbled on Wall Street as the gloomy outlook weighed on pre-holiday spirits, with the Dow Jones Industrial Average <.DJI> shedding 100 points, or 1.2 percent, to 8,419.
U.S. President-elect Barack Obama is expected to unleash a massive government spending program when he takes office next month to reinforce the powerful policy boost from the Fed, which has also pumped over $1 trillion into credit markets.
Vice President-elect Joe Biden said the incoming administration was "getting awfully close" to cementing a deal with congressional Democrats on the package, which aims to create 3 million new jobs and could cost $775 billion or more. [ID:nN23402723]
The Richmond Federal Reserve Bank's manufacturing survey echoed the gloomy message in other data, falling to -55 in December from -38 the previous month. A services sector survey declined 8 points to -30.
Housing is at the heart of the problem. Existing home sales plunged a record 8.6 percent in November to a 4.49 million-unit annual rate, while a separate new homes sales report showed they retreated at a slower 2.9 percent pace.
The median existing home price fell 13.2 percent on an annual basis, down for a fifth straight month, to $181,300.
It was the largest drop since the current data series began in 1968 and probably the largest since the Great Depression, said Lawrence Yun, the chief economist for the National Association of Realtors.
Economists say falling house prices will improve affordability and help work off the overhang of unsold homes accumulated since the property market nose-dived last year.
Inventories of new homes declined 7 percent to 374,000 in November. But the supply of existing single family homes increased 1.4 percent last month to 3.550 million.
"Despite the overall softening in sales, there has been a solid trend of rising activity in California, Nevada, Arizona, and Florida, in areas where bargain-hunters are taking advantage of substantially discounted prices," said Michelle Girard, analyst at RBS Greenwich Capital.
Separate weekly reports on chain store sales offered conflicting signs on holiday shopping.
The International Council of Shopping Centers and Goldman Sachs said their chain store sales index rose 2.6 percent in the week ended Dec. 20, although the year-on-year decline deepened to 0.6 percent.
In contrast, the Johnson Redbook sales index showed a month-to-date decline of 1.1 percent, with sales for the Dec. 20 week 1 percent below their year-ago level. (Additional reporting by Doug Palmer in Washington and Chris Reese in New York; Editing by Dan Grebler)