Big drop in US consumer spending

Consumer spending accounts for two-thirds of US economic output

US consumer spending fell by 1% in October, the largest decline since September 2001, in a further sign of the deepening economic downturn.

Consumer spending, which makes up about two-thirds of economic activity in the US, had risen 0.3% in September.

Meanwhile, new orders of durable goods - goods intended to last for at least three years - fell by 6.25% in October.

The Commerce Department also said that the pace of new home sales in October fell to the lowest rate for 17 years.

Sales dropped by 5.3% to a seasonally adjusted annual rate of 433,000, the lowest rate since January 1991.

Other figures released on Wednesday showed that the number of new jobless claims last week fell to 529,000 from a 16-year high of 543,000 the week before.

Slowdown 'intensifying'

The falls in both in consumer spending and new orders of durable goods were bigger than analysts had expected.

"These data suggest the downward slide in economic activity is intensifying as the year comes to a close. The data are bad news across the board," said William Sullivan at JVB Financial Group.

On Tuesday, it was reported that the US economy shrank at an annual rate of 0.5% from July to September, a sharper contraction than previously estimated.

"It could be that fourth-quarter GDP will be as weak as negative 4%," said Dana Saporta at Dresdner Kleinwort.