The US economy shrank by 6.2% at the end of last year, its weakest performance in a quarter-century, as consumers and businesses ratcheted back spending, plunging the country deeper into recession.

The US economy shrank by 6.2% at the end of last year, its weakest performance in a quarter-century, as consumers and businesses ratcheted back spending, plunging the country deeper into recession, a US government report revealed yesterday - but even tougher times are expected ahead.

The plunge in the gross domestic product - a measure of a country's total output of goods and services - in the last quarter of 2008 was the worst since the 1982 recession, and indicates that the current recession has been deeper than previously believed.

The latest revision of the US data was only slightly worse than the UK figures realed earlier this week.

The second reading of last year's UK data from the Office for National Statistics showed that GDP contracted by 1.5% in the fourth quarter of 2008, unrevised from the initial estimate - but still the sharpest drop since 1980.

Nonetheless, the Commerce Department report yesterday showed the US economy sinking much faster than the 3.8% annualised - or 0.9% quarterly - for the October to December quarter first estimated by the government last month.

The announcement comes on the heels of a new budget from the Barak Obama administration - which, according to some economists, takes an un-realistically optimistic view of the near-term future of the US economy. Many economists predict consumers and businesses will keep cutting back spending, making the first six months of this year especially rocky.

Yesterday's data reveals that the US economy was at weakest in exports, retail sales, equipment and software.

Given the dismal state of the American jobs market, some believe an even sharper decline in first-quarter GDP is likely.

The US unemployment rate is now at 7.6%, the highest in more than 16 years. The Federal Reserve expects the jobless rate to rise to close to 9% later this year, and probably remain above 5% well into 2011.

A smaller decline in the economy is expected for the second quarter of this year.

However, the revised GDP figure marked the weakest quarterly showing since an annualised drop of 6.4% in the first quarter of 1982, when the country was suffering through a previous intense recession.

US consumers - spooked by vanishing jobs, sinking home values and shrinking investment portfolios - have made dramatic cutbacks. In turn, firms have slashed production and headcount. At the same time, rising foreclosures are aggravating the housing market, hard-to-get credit has stymied business investment and is hobbling the ability of consu ers to make big-ticket purchases.