The drop was largely attributed to a slump in oil prices, with energy prices falling by a record 17 per cent in November, almost double the 8.6 per cent decline in October.
Al Jazeera’s John Terrett in New York said that whether the US Federal Reserve cuts rates by a quarter or a half a per cent from the current one per cent, as is expected, will make little difference as US banks have already passed on to consumers all the rate cuts they are likely to.
“Much more important will be what the Fed says it thinks will happen in the economy in its accompanying statement and that is what will move the markets up or down,” he says.
Despite the news US stocks rose in early trading on Tuesday on expectations of a rate cut, with the Dow Jones Industrial Index up 62.68 points, or 0.73 per cent, to 8,627.21 on Tuesday, rebounding from Monday’s losses.
A private research group said earlier this month the US had entered a recession in December 2007, much earlier than anticipated, and George Bush, the US president, acknowledged a few days later that was the case.
In other economic news the US commerce department said construction of new homes fell in November by 18.9 per cent, the biggest drop in a quarter of a century.
The decline put the number of new homes constructed at an annual rate of 625,000 homes, the slowest pace on records dating back to 1959.
Investment giant Goldman Sachs reported a $2.12bn loss in the fiscal fourth quarter to November, the first loss since the investment firm went public in 1999.
Goldman Sachs was the last of two major independent investment banks which became bank holding companies earlier this year, in a bid to have easier access to credit to survive the current financial crisis.