GE, the US industrial conglomerate and one of the world’s largest companies, today issued a shock profits warning that it would miss full-year forecasts.

Jerome Heppelmann, portfolio manager at Liberty Ridge Capital, told Reuters: “It’s confirmation that we’re in a recession.”

GE shares fell $4.70 or 12.8 per cent to $32.05 yesterday while the Dow Jones industrial average closed 256.6 points or 2 per cent lower to 12,325.4 points after investors digested the implications of GE's warning. In London, the FTSE 100 index closed down 69.6 points at 5,895.5.

Jeff Immelt, chairman and chief executive at GE, said he was was disappointed by the results, adding: “Demand for our global infrastructure business remained strong, but our financial services businesses were challenged by a slowing US economy and difficult capital markets.”

The company, which because of its varied businesses is regarded as a bellwether of the economy, lowered forecasts for the year, prompting analysts to surmise the US is now in a full-blown slowdown.

It also emerged today that US consumer confidence has fallen to a 25 year-low, according to a Reuters/University of Michigan Survey of Consumers index, showing a fall from a 69.5 reading in March to 63.2 in April - the lowest since the poll began in 1982.

GE said profits for the first three months of 2008, fell from $4.57 billion (£2.31 billion) in the same period last year to $4.3 billion - the first fall since 2003 - blaming a poor performance from its financial services businesses. Total revenue grew 8 per cent to $42.2 billion.

It said earnings were hit after being unable to complete a number of assets sales because of the tighter credit markets. As a result, GE now expects annual earnings per share (EPS) from its financial services business to be between 5 per cent and 10 per cent lower and overall EPS to remain flat or decline by 5 per cent.

Goldman Sachs downgraded GE's shares from a "buy" to a "neutral", and analyst Deane Dray removed the company from the bank's America's Best Buy list, stating that today's results raised "credibility concerns". Credit Suisse also downgraded the stock from an "outperform" to a "neutral".

Stephen Surpless, senior analyst at Cantor Fitzgerald, told Reuters: “These results confirm that the slowdown is widespread and beginning to impact capex and longer-cycle businesses,”

He added: “While the credit crisis might be nearer to the end than the beginning, according to some, the impact on the real economy is taking place and is unlikely to abate in 2008.”

In July last year, just before the credit crunch took hold of global financial markets, GE announced plans to sell its sub-prime mortgage home loan business, WMC Mortgage, which contributed to a $373 million rise in bad debts during the first quarter of 2007. Prior to announcing the sale, GE said it had sold on $3.7 billion of loans, leaving it saddled with $1 billion of borrowings.

During the first three months of this year, GE said that its infrastructure division, which is the largest of the company's six businesses, performed well with profits up 17 per cent and revenues ahead 23 per cent.

In contrast, its healthcare unit, where it makes medical products including imaging equipment, first quarter profit fell by 17 per cent which was far below the forecast 5 per cent increase. GE is yet to ship any of its OEC x-ray machines after agreeing with the US Food and Drug Administration to fix manufacturing deficiencies.

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