NEW YORK, Nov 6: When the US Federal Reserve meets on Tuesday, central bankers will have enough evidence of the devastating economic impact of the Sept. 11, attacks to warrant another half-point interest rate cut, economists say.

October data released last week showed the nation’s unemployment rate spiked, consumer confidence and spending plunged and a manufacturing slump deepened. There is broad agreement that the United States is already in a recession.

The employment report was the straw that would shift the Fed in the direction of lowering rates more aggressively, said Anthony Chan, chief economist at Banc One Investment Advisors in Columbus, Ohio.

The Fed has already made two half-point rate cuts since the Sept. 11, attacks that killed about 4,800 people, and most leading Wall Street dealers expect a third half-point cut.

Evidence mounted last week that a manufacturing-led downturn was at last taking its toll on US consumers.

On Friday, the Labor Department reported the economy shed 415,000 jobs in October, the biggest monthly decline in more than two decades. The unemployment rate shot up to 5.4 per cent from 4.9 per cent in September.

That begins to have an impact on aggregate income growth and people’s expectations for what the future holds, said Tim O’Neill, chief economist at Bank of Montreal/Harris Bank.

The government said last week consumer spending slid 1.8 per cent in September, its biggest decline in more than 14 years. Both O’Neill and Chan predict consumer spending will decline in the fourth quarter for the first time in a decade.

As layoffs spiked, the Conference Board reported its consumer confidence index fell to the lowest level in more than seven years in October.

The housing market, which had held up pretty well in the past year, showed signs of fraying in September. Existing home sales fell 11.7 per cent in the largest drop since April 1995.

The National Association of Purchasing Management’s closely watched gauge of manufacturing activity sank to 39.8 in October — its lowest level since Feb. 1991, during the last recession.

Although far from encouraging, the government’s first estimate of third-quarter gross domestic product last week did come in better than expected.

The Commerce Department said the economy contracted at a 0.4 per cent rate in the July-September quarter, the worst performance since the last recession. That was confirmation for many that a recession had begun, but economists had expected a deeper 1.0 per cent GDP decline.—Reuters