Only the jobless rate is growing in America's shrinking economy

The scale of the downturn facing the US economy was underlined yesterday as new figures showed manufacturing output at an 11-year low and insecure consumers making their biggest spending cuts for almost 15 years.

In a report that surprised economists, the National Association of Purchasing Management said its index of manufacturing fell much more sharply than expected, from 47 in September to 39.8 last month, a level not seen since January 1991 at the trough of the last recession.

Fears that the manufacturing downturn would swiftly spread to services after September 11 were intensified by separate figures showing that consumer spending fell 1.8% in September, the biggest decline since January 1987.

The International Labour Organisation said yesterday that 24m people could be thrown out of work next year by the global slump.

With US companies running down stocks and orders dropping, Norbert Ore, head of the NAPM's business survey committee, said: "The manufacturing sector received a very significant setback driven by the events of September 11. The decline in production and new orders are among the largest in the history of our report, which began in 1931."

The number of Americans out of work and claiming benefit has risen to an 18-year high, according to the department of labour, and analysts warned that today's labour market report is likely to show a huge rise in unemployment.

Yesterday's gloomy jobs and manufacturing data added to expectations that the contraction in the economy which began with a 0.4% decline in the third quarter is gathering pace. Economists expect this quarter to show a deeper decline, with Jim O'Sullivan of UBS Warburg forecasting a 2% fall, followed by a further 1% decline in the first three months of next year - and a 3% bounce back in the second quarter.