US government figures show that household spending in the country fell by 1% in October, the steepest decline since September 2001.
The Commerce Department report showed that the sharp drop in spending came even as incomes rose 0.3% in the month. Economists had expected a 0.1% rise in incomes and a 0.7% drop in spending.
The report showed a dismal beginning to the fourth quarter for the US economy, which relies on consumer spending for around two-thirds of economic activity.
Separate figures showed that US consumer confidence fell to a 28-year low in November as mounting job losses, falling incomes and tumbling household wealth affected sentiment. The Reuters/University of Michigan Surveys of Consumers said its final index reading of confidence for November fell to 55.3 from October's 57.6.
The index came in well below economists' expectations of 57.7, and deteriorated sharply since the middle of the month, when lower petrol prices had cheered many consumers. 'Consumers were unanimous in their recognition that the economy was in recession, and nearly three-in-four expected the recession to deepen in the months ahead,' said the report.
Two other economic reports were equally grim. The Commerce Department said orders for big-ticket durable goods fell a whopping 6.2% in October, a further bad sign for manufacturing.
The drop in durable goods - such as planes, cars and fridges - was sharper than the 2.5% decline expected on Wall Street.
A separate report said new claims for unemployment benefits rose to a fresh 16-year high. Claims in the week to November 22 increased by 14,000 to 529,000.
