US consumer spending fell last month as overstretched families cut back on purchases, new figures show.

According to government data, spending slipped by 0.3 per cent in September amid fears of a looming recession in the country.

The drop was the largest since June 2004 and follows flat readings in July and August.

Consumer spending accounts for two-thirds of economic activity in the US. The latest figures have therefore added to fears that a recession is imminent.

Indeed, gross domestic product declined at an annual rate of 0.3 per cent during the third quarter of the year, official figures show.

The common definition of a recession is two consecutive quarters of negative growth.

In response to the gloomy data, the Federal Reserve cut interest rates to one per cent, possibly brining some relief to those struggling with debt.

However, whether this will encourage consumers to head back to the shops and start spending again remains unclear.

A survey carried out earlier this month by AlixPartners revealed that 64 per cent of US consumers intend to spend less this Christmas.

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