"The concerns and the fears... have already begun to undermine confidence in the economy and cause both consumers and businesses to hold back on what they are willing to spend," she said.

Obama's campaign points to steady, if slow, improvement in the economy since he has taken office, and says he could have done more if Republicans in Congress had not blocked his efforts to stimulate growth.

"Clearly, the economy is not functioning as well as we know that it could be. The political question is who are people going to point the finger at in doing that," said Heather Boushey, an economist at the liberal Center for American Progress, which has close ties to the White House.

"The biggest problem in our economy is the U.S. Congress," she said.

ROMNEY JET-SKIING

While the poor economy hurts Obama, it also holds risks for his rival.

Unrelenting Democratic attacks calling Romney a job killer during his time as a private-equity executive have helped drag down his poll numbers.

Romney is spending the week at his $10 million lakeside New Hampshire vacation estate, which features a three-vessel boat garage and where he and his wife have been photographed skidding across the lake on their personal watercraft.

That could provide fresh fodder for the Democrats' portrayal of Romney as out of touch with ordinary Americans.

"It's a bad headline. It can help reinforce or enforce perceptions, whatever they may be," said Ethan Siegel, an analyst at the Washington Exchange, which tracks political developments for investors.

However, economic worries are much more prominent in voters' minds that Romney's vacations.

"In the end, no one's going into the voting room, saying 'Romney, he was in New Hampshire for the 4th of July and I'm voting no.' It's buzz, it's chatter but it don't matter," Siegel said.

(Additional reporting by Deborah Charles; Editing by Alistair Bell and Philip Barbara)