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Friday, 30 November, 2001, 23:43 GMT
US economy shrinks fast
The US economy is shrinking at its fastest rate in over 10 years, according to revised government figures.

1998 +4.3%
1999 +4.1%
2000 +4.1%
Q1 2001 +1.3%
Q2 2001 +0.3%
Q3 2001 -1.1%
The US economy contracted at an annual rate of 1.1% between July and September, the weakest figures in a decade.

This is a far bigger contraction than the 0.4% previously forecast by the government.

It has been a dark week for the US economy, which was officially declared to be in a recession on Monday.

The White House said that President George W Bush "was troubled" by the latest figures.

More interest rate cuts?

The downward revision is also significantly worse than the 0.9% Wall Street economists had been expecting.

It is unimaginable that the Senate would leave town without completing its work on the stimulus package

Ari Fleischer
White House spokesman
The US economic slowdown has become much more severe since the 11 September terrorist attacks on New York and Washington.

Analysts say the gloomy economic data is likely to prompt further interest rate cuts.

But with US interest rates already at just 2% - the lowest level for 40 years - there is not a great deal more scope for action from the Federal Reserve.

"Given this latest report, it would be unimaginable that the Senate would leave town without completing its work on the stimulus package," Mr Bush's spokesman Ari Fleischer said.

Promising signs

The tumbling of corporate profits is cited as a main reason behind the poorest three-monthly growth rate since the first quarter of 1991.

But there were a few promising signs in the report, including the fact that inventories were drawn down at an extremely fast rate.

This means that companies have been working hard to reduce the back log of stocks, and that the worse for the manufacturing industry could already be behind it.

There are also signs that consumer spending - which fuels economic activity - is holding up relatively well.

Shrugging it off

The US stock markets shrugged off the gloomy news, with some traders considering it a positive sign, believing it could clear the wave for further cuts in US interest rates.

The Dow Jones index of leading US shares closed up 22.14, or 0.2%, at 9,851.56.

The final estimate of third quarter GDP will be made on 21 December while the Federal Reserve will make its next interest rate decision on 11 December.

The BBC's Stephen Evans
"The recession will get deeper before it ends"

Terror's impact

Signs of a slowdown

Rate cuts


Key players

See also:

26 Nov 01 | Business
US officially enters recession
18 Nov 01 | Business
US recession raises global fears
26 Sep 01 | Business
US economy in freefall
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