A shop assistant cleans a window at a clothing store which is offering sale discounts in Buenos Aires, Dec. 15, 2008. The world's economies limped toward Christmas on Tuesday, with a U.S. contraction confirmed, Britain shrinking more sharply than thought and Spain and New Zealand languishing in recession.[Xinhua]

The world's economies limped toward Christmas on Tuesday, with a U.S. contraction confirmed, Britain shrinking more sharply than thought and Spain and New Zealand languishing in recession.

The U.S. economy shrank an unrevised 0.5 percent in the third quarter, official data showed. Consumer spending plunged 3.8 percent, the biggest drop since 1980.

"I think the fourth quarter contraction will be more severe ... and the first quarter of next year will even be worse," said Roy Williams, CEO of Prestige Wealth Management Group in Pennington, New Jersey.

Britain, Spain and New Zealand added to evidence that global stimulus measures, bank bail outs and interest rates heading for zero may not prevent the worst downturn in decades.

The British economy shrank by 0.6 percent in the third quarter, the worst quarterly decline since 1990 and worse also than the earlier 0.5 percent estimate.

"It really does paint an exceptionally gloomy picture about the speed with which the UK economy has lapsed into recession," said Matthew Sharratt, economist at Bank of America.

People walk past the Jelmoli department store on Zurich's main shopping street Bahnhofstrasse Dec. 20, 2008. [Xinhua]

New Zealand's economy declined by a seasonally adjusted 0.4 percent in the third quarter, the biggest drop in eight years, following a 0.2 percent fall in Q2.

And Spain succumbed to recession for the first time in 15 years. Spain's ISA activity indicator, which tracks gross domestic product, contracted 1.5 percent year-on-year between October and December, according to Economy Ministry data.

"The ISA shows the trend, and the trend is that the fall in fourth quarter GDP is going to be steeper than in the third," a ministry spokeswoman said.

Italian consumer confidence fell for a third month running in December but French consumer spending rose unexpectedly in November, driven by purchases of household goods and despite a continued slump in car sales.

Analysts were not taking that as much of a ray of hope.

"At the moment, (French) consumer spending is the only thing that's holding up amid the crisis, because everything else is going down," said Alexander Law, chief economist at Xerfi.

Nonetheless, European stocks gained 0.8 percent, breaking a four-day losing run as investors bought banks, which have endured a battering this year.

U.S. stock futures pointed to a steady start on Wall Street.

Oil prices extended their sharp fall to drop further below US$40 a barrel, weakened anew by growing signs of dwindling world oil demand.

More Spending, fewer Jobs

Governments around the world have ramped up spending to try to cushion the blow of the worst financial crisis in 80 years, a policy underscored by a record US$38 billion two-year note auction by the U.S. government on Monday.

The auction drew bids worth more than twice that amount, showing the government is so far having no trouble attracting buyers for its debt, even as yields drop below 1 percent.

Even more stimulus is on the way when U..S President-elect Barack Obama takes office next month. His staff are discussing how much money Congress should authorize for a package that is likely to be well over US$600.

Governments should be ready to increase their spending on economic programs if circumstances require it, the International Monetary Fund's chief economist Olivier Blanchard said in comments published on Tuesday.

"The coming months will be very bad. Halting this loss of confidence, providing stimulus and, if necessary, replacing private demand are essential if we want to prevent the recession from becoming a Great Depression," Blanchard told Le Monde.

Companies around the globe are facing evaporating demand, which has prompted many of them to slash jobs and investment.

U.S. heavy equipment maker Caterpillar Inc said on Monday it would cut white-collar pay by as much as half and offer buyouts to some employees as it looks to cut costs during what it characterized as "uncertain times.

Textron Inc, the world's largest maker of corporate jets, said it would eliminate 2,200 jobs worldwide.

The world's top carmaker, Toyota Motor Co on Monday forecast its first-ever group operating loss - 150 billion yen (US$1.7 billion) for the year to end-March - citing a relentless sales slide and a crippling rise in the yen.

(Xinhua News Agency via China Daily December 24, 2008)