US economy shrinks following bad news

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Figures from the US Commerce Department have revealed today that the US economy contracted at its fastest pace in the July to September period, since the aftermath of the 9/11 terrorist attacks 7 years ago.

Gross Domestic Product (GDP), which is used as a measure of economic health, fell by 0.5% in the third quarter, said the Commerce Department.

Some analysts believe that GDP has declined at an even faster rate during the last quarter of 2008 and could fall as much as 6%, this would represent the highest fall since a fall of 6.4% in the January to March period in 1982.

Official figures last month revealed that the US entered recession in December last year. A country is considered to be in recession when it experiences two consecutive quarters of negative growth, but the figures also took into account data such as job losses.

Since the start of the year, the US has experienced a fall in employment every month and the unemployment rate is currently at 6.7% – a 15-year high.

In the meantime, according to a survey by the America’s Research Group and UBS, just 39% of people visited the shops at the weekend and those who did venture out, visited discount stores such as Wal-Mart.

The last Saturday prior to Christmas is known as ‘Super Saturday’ because it ranks just behind Black Friday (the day after the Thanksgiving holiday). However, the concern over job security and heavy snow in the north-east of America kept shoppers away.

More bad news came from the US Commerce Department in the shape of new home sales, which slowed to their lowest level in 17 years in November.

Meanwhile, new home prices also fell by the largest amount in eight months. The figures are further proof that the slump in the US housing market has not yet reached rock bottom.

Many analysts believe it is likely that the housing slump will last well into 2009.

In related news, figures today released from the Office for National Statistics have revealed that the UK economy contracted faster between the third quarter of the year than originally thought.

Previous estimates showed that there had been a contraction of 0.5%, however the figure was actually 0.6% during the July and September period.

The figures will indicate the UK economy is flirting with recession as it is the first quarter since April to June 1992 in which UK economic activity has contracted.

Official figures have revealed that Spain and New Zealand have entered recession today.

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