The American economy contracted for the first time in eight years in the third quarter and at the fastest rate for a decade, official figures showed yesterday.
The data heightened fears of an imminent recession. But the 0.4 per cent fall in third-quarter GDP was half the size expected by analysts,triggering a rally on Wall Street after several days of sharp falls.
The contraction is the first since the first quarter of 1991 and is the steepest since the same quarter when it shrank by 2 per cent.
President George Bush seized on the figure, saying that the contraction had "really shocked the nation" and urged Congress to approve his economic stimulus package.
"People are having tough times in America," he told an audience of business leaders. "We've got to put aside political differences and act swiftly and strongly on behalf of the American workers." Paul O'Neill, the Treasury Secretary, said if the stimulus took effect quickly "there is still a plausible argument that the fourth quarter could be mildly positive".
But if, as many economists expect, the US economy also shrinks in the current quarter this will meet the widely accepted definition of recession.
Yesterday's figures covered the three months to the end of September, which means that it only captured the first three weeks' impact of the terrorist attacks. Since then there have massive redundancies, a rise in unemployment and a slump in consumer confidence, which bode badly for the current quarter.
Market-watchers had expected a drop of a 1 per cent and the more benign figure helped share prices. There was additional support from a Chicago manufacturing survey that came in less negative than forecast.
