WASHINGTON - THE US economy shrank more severely during the third quarter than first estimated as consumers cut spending at the steepest rate in 28 years, according to a Commerce Department report on Tuesday that underlined how rapidly activity was slowing.

It was the sharpest fall in GDP since the third quarter of 2001 when the terror attacks against the United States took place.

Many analysts consider that the United States has already joined Europe in recession, though it will take another quarter of contraction to meet a widely used definition for it - back-to-back quarters of declining output. The third-quarter decline was a striking contrast with the second quarter's relatively brisk 2.8 per cent rate of growth.

The latest revision was in line with forecasts by private economists and reflected weaker consumer spending, exports and government expenditures.

The report reflected an abrupt turn from growth of 2.8 per cent in the second quarter, although analysts said that figure was skewed by a surge in exports and consumer spending boosted by one-time tax rebates.

Many economists say the downturn in the fourth quarter could be much worse, reflecting a credit crunch and ongoing woes in housing and manufacturing. - THOMSON REUTERS, AFP