US consumer spending fell by one per cent in October, the largest decline since September 2001, in a further sign of the deepening slump, official figures revealed yesterday.
Consumer spending makes up about two-thirds of economic activity in the US.
New orders of durable goods, goods intended to last for at least three years, fell by 6.25 per cent in October.
Yesterday’s figures also showed the numbers of new jobless remained extraordinarily high, reaching 529,000, very close to the 16-year high of 543,000 the week before.
The falls in both consumer spending and new orders of durable goods were bigger than had been expected.
Adding to the economic crisis, revised US data showed that the US economy shrank at an annual rate of 0.5 per cent from July to September, a sharper contraction than previously estimated.
The initial estimate had put the rate of decline at 0.3 per cent.
The US Commerce Department said the downward revision was due to the biggest fall in US consumer spending in 28 years.
In another sign of slump, figures showed home prices in the US had dropped by a record annual rate.
The Standard & Poor’s/Case-Shiller US National Home Price Index fell 16.6 per cent from July to September.
Many economists now admit that the world economy is now in recession and that the US economy has been joined by the eurozone and Japan.
Last week, analysts surveyed by the National Association for Business Economists said the US recession was set to continue into 2009.
A separate survey by the Philadelphia Federal Reserve Bank also predicted that the recession would last for 14 months.
The third quarter 0.5 per cent fall in GDP is the biggest since the third quarter of 2001, when the September 11 attacks took place.
The US Commerce Department also said that corporate profits fell for a second quarter in a row.
l German carmaker Porsche has pushed back its planned takeover of Volkswagen because of falling sales.
Porsche said it might not take majority control of VW this year, and that it would not pay ‘ridiculous’ prices.
Porsche also reported pre-tax annual profits of 8.57bn euros (£7.2bn) after its most successful year in the carmaker’s 60-year history.
However, it said in a statement: ‘Worldwide, signs of a serious slump in the automobile industry are clearly visible.’
This was especially so in its important US market.
Porsche warned that its profits for the four months to November would be 15 per cent lower than a year ago because of the downturn.
Porsche chief executive Wendelin Wiedeking, declined to give a full-year profit forecast, saying that ‘it cannot be done reliably now’.
On the VW takeover, he added: ‘In view of the current economic environment, it is becoming increasingly unlikely that we will reach this target in this calendar year. We are under no time pressure.’
On Monday, Porsche said it had stopped assembly lines for one day at its main plant and would be halting production for seven more work-days up to the end of January because of weaker demand.
Elsewhere, Japanese auto maker Toyota said it would be closing a factory in France for two weeks in December, and would slash production at the plant from next year.