That, said the 'New York Times', would be the first quarterly decline since 1990 ahead of the 1991 recession and steepest since 1981.

Consumer spending, which accounts for nearly two-third of the economy, grew modestly earlier in the year but fell in July and August on an annualised rate.

Recent figures from companies, and interviews across the country, show that automobile sales are plummeting, airline traffic dropping, restaurant chains struggling to fill tables, customers are sparse in stores, the paper said.

Many economists, who began the third quarter expecting modest growth, now believe the cutbacks are so severe that the overall economy did not expand either, and they warn that a consumer-led recession could be more severe than the relatively mild one earlier this decade, the 'Times' added.

For some Americans, the Times said, the pain is already acute: jobs disappeared at a faster clip in September. For many others, day-to-day finances are fine for now, but the financial outlook is uncertain: 401(k) accounts are dwindling, loans are hard to get and house prices continue to fall.

The paper says the impact of the financial news of the last two weeks has been palpable in many parts of the country.