Special Report: Global Financial Crisis
WASHINGTON, Oct. 30 (Xinhua) -- The U.S. economy contracted in the third quarter of this year at an annual rate of 0.3 percent, signaling the country is likely heading into a recession, the Commerce Department reported Thursday.
This was the worst showing since the world's largest economy shrank at a pace of 1.4 percent in the third quarter of 2001, when the nation was suffering its last recession.
The contraction came as nervous consumers cut back on spending by 3.1 percent, the biggest amount since the second quarter of 1980.
It marked the first drop in consumer spending, which accounts for two thirds of the country's overall economic activity, since late 1991, when the economy was coming out of a recession.
In the July-to-September period, consumers cut back on purchases of cars, furniture, household appliances, clothes and other things.
Meanwhile, businesses cut spending on equipment and software at a 5.5 percent pace, the most since the first quarter of 2002.
Residential spending plunged at a 19.1 percent pace in the third quarter, marking the 11th consecutive quarterly decline.
Exports of goods and services, a major force pushing the economy to grow in the past quarters, slowed in the third quarter, reflecting less demand from overseas buyers who are coping with their own economic problems.
The nation's exports grew at a 5.9 percent pace in the third quarter, a sharp deceleration from the 12.3 percent growth rate in the second quarter.
Imports of goods and services, which are subtracted in the calculation of Gross Domestic Product (GDP), declined by 1.9 percent, compared with a sharper 7.3 percent plunge.
Spending by the federal government increased by 13.8 percent in the third quarter, more than double the 6.6 percent gain in the second quarter.
"Most of the major components contributed to the downturn in real GDP growth in the third quarter," the Commerce Department said in the report.
GDP measures the value of all goods and services produced within the United States. The third-quarter GDP data will be revised twice by the department.
The economic downturn in the third quarter was accompanied by higher inflation.
An inflation gauge tied to the GDP report showed the so-called "core" prices, which exclude volatile food and energy, rose at a 2.9 percent pace, up considerably from the 2.2 percent growth rate in the second quarter.
But the Federal Reserve, which is the U.S. central bank, predicts that the economy's slowdown will dampen inflation pressures in the months ahead.
The contraction in the third quarter was seen as a strong signal that a recession may have already begun.
The classic definition of a recession is two consecutive quarters of negative GDP. Many economists believe the economy will continue to shrink in the fourth quarter and early next year.
Trying to deal with the financial crisis and revive the economy, the Federal Reserve Wednesday cut a key interest rate by half a percentage point to a four-year low of 1 percent, the second rate cut in just three weeks.
Besides cutting interest rates, the Federal Reserve was extending credit lines worth 30 billion dollars each to the central banks of Brazil, Mexico, South Korea and Singapore in an effort to bolster financial markets in those countries and relieve investors' anxieties.
At the same time, the U.S. government started distributing funds Wednesday from the 700 billion dollar financial rescue package passed by Congress early this month.
The government was also nearing an agreement on a plan to help around 3 million homeowners avoid foreclosure. That would be the most aggressive effort to limit damage from the severe housing slump, which began in 2006, according to news reports Thursday.
"Policymakers have their foot to the accelerator and they are using every effort at their disposal to stop the slide in the economy and financial markets," Mark Zandi, chief economist with Moody's Economy.com, was quoted as saying.
"And it's not a moment too soon given the serious damage that has already been done," Zandi said.
Federal Reserve cuts rates by half-point to avert economic crisis
WASHINGTON, Oct. 29 (Xinhua) -- The U.S. Federal Reserve decided Wednesday to cut a key interest rate by half a percentage point to 1.0 percent to prevent the economy from slipping into deep recession.
The Wednesday's unanimous vote set the rate to the lowest level since 2004, when the U.S. economy was climbing out of a recession earlier in the decade. The funds rate has not been lower since 1958, when Dwight Eisenhower was president. Full story
Wall Street trades mixed after Fed cut rates
NEW YORK, Oct. 29 (Xinhua) -- Wall Street traded mixed Wednesday after the U.S. Federal Reserve cut interest rates.
The Fed cut a key interest rate by half a percentage point to 1.0 percent to prevent the economy from slipping into deep recession. Full story
Oil rallies back above 67 dollars on Fed rate cut
NEW YORK, Oct. 29 (Xinhua) -- Crude oil rallied more than 4 U.S. dollars to above 67 dollars a barrel on Wednesday as a rate cut by the U.S. central bank outweighed a build-up in crude stockpiles.
Light, sweet crude for December delivery surged to as high as 68.91 dollars a barrel before retreating to settle at 67.50 dollars a barrel, trading up 4.77 dollars or more than 7 percent, on the New York Mercantile Exchange (NYMEX). Full story
Dollar falls after U.S. rate cut
NEW YORK, Oct. 29 (Xinhua) -- The dollar fell against major currencies on Wednesday after the U.S. Federal Reserve decided to cut its benchmark rate to stimulate the economy.
The Fed decided Wednesday to lower its target for the federal funds rate 50 basis points to 1 percent, a low last seen in 2003-2004. The funds rate has not been lower since 1958. Full story
China cuts benchmark interest rates by 0.27 percentage points
BEIJING, Oct. 29 (Xinhua) -- China's central bank, the People's Bank of China (PBOC), announced on Wednesday it would cut benchmark interest rates by 0.27 percent to spur economic growth as of Oct. 30.
The benchmark one-year deposit rate would drop to 3.60 percent from 3.87 percent, while the benchmark one-year lending rate would fall from 6.93 percent to 6.66 percent. Full story
Survey: U.S. consumer confidence plummets to all-time low
NEW YORK, Oct. 28 (Xinhua) -- The U.S. consumer confidence tumbled to an all-time low in October as the stocks plunged and credit crisis worsened, a research survey report revealed here on Tuesday.
The Conference Board Consumer Confidence Index now stands at 38.0, down from 61.4 in September. The decline in the index is the third largest in the history of the series, and the lowest reading on record, according to the report. Full story
Federal Reserve, six other central banks slash interest rates to cope with crisis
WASHINGTON, Oct. 8 (Xinhua) -- The Federal Reserve, together with six other major central banks from around the world, slashed interest rates Wednesday to cope with the current financial crisis.
The U.S. central bank decided to lower its target for the federal funds rate 50 basis points to 1.5 percent. It also approved a 50-basis-point decrease in the discount rate to 1.75 percent. Full story
