General Electric Co reported a 42 percent drop in profit, as a global economic slump hammered its hefty finance arm and eroded demand for the heavy equipment it manufactures.

The largest U.S. conglomerate, whose shares were down 0.8 percent in premarket trading, reported third-quarter profit of $2.49 billion, or 23 cents per share, compared with earnings of $4.31 billion, or 43 cents per share, a year earlier. Revenue fell 20 percent to $37.8 billion.

Chief Executive Jeff Immelt said the economy is beginning to slowly recover.

The world's largest maker of jet engines and electricity-producing turbines has faced falling demand for its big capital equipment. But so far this year it has counted on revenue for maintaining products it has already sold to boost results.

At the same time, it has been cutting back its GE Capital finance arm, which had invested heavily in commercial real estate and has been hard hit by the credit crunch.

After plumbing 18-year lows in March, GE shares are now up about 4 percent so far this year, trailing the 15 percent rise of the Dow Jones industrial average <.DJI>.

(Reporting by Scott Malone; Editing by Derek Caney)

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