Paulson says US in sharp downturn

Mr Paulson is optimistic about the economic stimulus package

US Treasury Secretary Henry Paulson has said that the US economy has "turned down sharply".

But he is optimistic that US government tax rebate cheques, which are due to be sent out at the start of May, will make a real difference.

He also said that the additional capital being raised by the housing finance firms Fannie Mae and Freddie Mac was "very very important".

He was addressing the Council of Institutional Investors in Washington.

"It's very important that they continue to play an active role," he added.

High Streets

There were more signs that the slowdown is hitting US retail sales in figures from Thomson Financial.

Its preliminary tally for March found that 17 retailers had missed sales estimates, while only six had done better than they expected.

Customers appeared to be turning to discounters, with Wal-Mart raising its earnings outlook for the first three months of the year after seeing sales rise in March.

"Consumers are looking for value and are willing to trade down," said Janet Hoffman from Accenture.

The warehouse club operator Costco also appeared to be benefiting from that effect, with March sales at its stores open at least a year rising 7%.