US Economy Shrinks More Than First Thought

The world's largest economy shrank between July and September more than first thought.

A government report Tuesday says a measure of all the goods and services produced in the United States shrank by half a percent in the third quarter. That is two-tenths of a percent worse than first estimated.

Economists blame the shrinkage in the GDP on the sharpest fall in consumer spending in decades.

Officials and investors watch consumer spending carefully because consumer demand drives about two-thirds of all U.S. economic activity.

To boost faltering spending, Washington has just announced a new loan program to help companies that issue credit cards, make student loans, and finance automobile purchases. The effort is also aimed at making more loan money available to home buyers.

Also Tuesday President-elect Barack Obama is expected to announce more appointments to his team of economic advisers.

On Monday, Mr. Obama nominated New York Federal Reserve President Timothy Geithner as the new Treasury Secretary. He also named Former Treasury Secretary Lawrence Summers to head the policy-making National Economic Council.

Meanwhile, a leading international economics organization warns many of the world's major economies could soon suffer the worst recession since the 1980s.

The Organization for Economic Cooperation and Development is forecasting declines in the United States, Europe and Japan.

The organization's chief economist, Klaus Schmidt-Hebbel, also says the number of unemployed across OECD member economies may rise by eight million.

Also Tuesday the World Bank said it expects China's economic growth will slow next year to its lowest rate in nearly two decades.

The bank today cut its 2009 growth forecast for China to 7.5 percent because of the global financial crisis, nearly two points lower than the expected rate for this year (9.4 percent).

World Bank economist Louis Kuijs says China's downturn will worsen in the first half of next year because of weakening export demand.

He says that while China cannot avoid the global financial crisis, it can take steps to minimize its impact on the country.

China has already announced plans for a multibillion dollar stimulus plan to boost its economy. The plan calls for spending on construction, tax cuts and aid to the poor and farmers.

On Monday, Britain announced its own economic stimulus package to combat the effects of the financial crisis there, while the United States said it could take more measures to repair its shattered financial system.

Britain's finance minister, Chancellor of the Exchequer Alistair Darling, announced a $30-billion package to get people spending again.

He also said Britain's economy could shrink by as much as 1.25 percent next year.

The U.S. Treasury and U.S. central bank are expected to announce Tuesday a new lending program to make more financing available to American consumers.

Asian markets soared Tuesday in reaction to the latest actions by treasury officials in the United States and Britain.