The US economy shrank at its fastest pace in the third quarter since the aftermath of the attacks of September 11, 2001, figures released yesterday showed.

The Commerce Department said that gross domestic product (GDP) declined by 0.5 per cent in the three months from July to September. This is the sharpest fall since the third quarter of 2001, in which America reeled from the 9/11 terrorist attacks. GDP then fell by 1.4 per cent.

Analysts believe that GDP has fallen even faster in the final quarter of this year and could decline by as much as 6 per cent in the three months from October to December. This would be the biggest fall since a 6.4 per cent plunge in the first quarter of 1982.

The National Bureau of Economic Research (NBER) said last month that the United States fell into recession in December 2007. As well as the usual rule that two consecutive quarters of falling GDP equals a recession, the NBER takes into account data such as job losses. Employment has fallen every month since last January, with the unemployment rate now at a 15-year high of 6.7 per cent.

GDP fell by 0.2 per cent in the fourth quarter of 2007 before rising for two consecutive quarters, going up 0.9 per cent in the first quarter and 2.8 per cent in the second quarter.

Nariman Behravesh, chief economist at IHS Global Insight, the economics consultancy, predicts that GDP will fall by 4 per cent in the first quarter of 2009. “Assuming that the incoming Obama administration does enact [its] $850 billion financial stimulus package quickly, it will do little to stop real GDP growth from dropping like a stone in the first half of 2009 but could help turn things around in the second half and provide a basis for sustained growth in 2010,” he said.

The gloom was compounded by a survey indicating dire retail sales in the final weekend before Christmas, in which the lowest number of people in six years went to the shops.

A survey by America's Research Group and UBS showed that only 38.7 per cent of people shopped at the weekend. Those that did went to discount stores, such as Wal-Mart.

The last Saturday before Christmas is known as Super Saturday because it ranks just behind Black Friday, the day after the Thanksgiving holiday, as the biggest single day of shopping sales in the year. But snowstorms and worries about unemployment kept shoppers away from the stores.

Last year 41.6 per cent of people went shopping on Super Saturday and the subsequent Sunday. Wal-Mart was the biggest winner at the weekend, with 69 per cent of shoppers reporting that they visited a Wal-Mart store, up from 33 per cent last year.

The National Association of Realtors said that sales of existing properties fell by 8.6 per cent in November to just under 4.5million, down from 4.9million in October.

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