The US Federal Reserve is expected to cut another 0.25 of a percentage point off US interest rates today amid further evidence of a rapid deterioration in economic growth.

The markets expect the Fed to lower the key overnight bank lending rate to 2.5 per cent, a level last seen during the Kennedy administration, in an attempt to re-ignite the economy.

An index recording US manufacturing output in September issued yesterday showed the slump at factories extended to the 14th consecutive month with further bad news expected this month.

The National Association of Purchasing Management Index (NAPM) fell to 47 last month from 47.9 per cent in August reflecting decisions by manufacturers such as Ford, Boeing and Goodyear to cut production or lower earnings estimates because of the expected drop in future sales.

The US Commerce Department added to concerns about the economy revealing that personal spending had already begun to slow down significantly in August with consumer demand data coming in below analyst forecasts.

Official figures showed that for the second consecutive month spending increased by 0.2 of a percentage point, below forecasts of 0.3 of a percentage point, despite lower interest rates and tax rebates.

As consumer demand accounts for an estimated 66 per cent of US gross national product, economists are predicting the economy has begun to move into recession.

Wall Street opened weaker as analysts continue to downgrade growth prospects for the months ahead. Reports that companies won't be allowed to report financial losses due to the terrorist attacks as extraordinary items in the accounts added to the confusion. The Dow Jones Index yesterday fell 11 points to 8,836.56.

Intel was traded heavily on Wall Street yesterday as Merrill Lynch reduced its fourth quarter profit estimate for the largest semiconductor maker, by 36 per cent to nine cents a share.

Corporate earnings had already begun to slip before the events of September 11th with analysts now suggesting that companies in the S&P 500 Index will record a 19.4 per cent drop in profits for the third quarter and a 77 per cent fall this quarter. Before the terrorist attacks the decline in profitability had been expected to be around 14.7 per cent and 2.6 per cent in the third and fourth quarters respectively.