The US has always been a consumer-driven society; so the news that consumer spending rose in February at the slowest pace in more than a year can only add to the general despondency in world markets.

Data released by the US commerce department in Washington DC showed that spending by American consumers in February had registered a miniscule 0.1 per cent increase, after a 0.4 per cent gain in January, matching analysts' projections.

Falling home prices, job losses and higher oil prices are driving down consumer spending, which accounts for more than two thirds of the economy. This announcement was immediately followed by JC Penney, the third-largest US department- store chain, cutting its sales and earnings forecasts.

The consumer sentiment index decreased to 69.5 in March, from 70.8 in February and down from a preliminary reading of 70.5. The figure was less than what analysts anticipated. The report's measure of overall prices rose 0.1 per cent as compared to a less-than-forecast 3.4 per cent increase in the year ended in February.

Adjusted for the increase in prices, spending was unchanged in February after increasing 0.1 per cent.

Seeking to ease credit, restore confidence in financial markets and cushion the slowdown, the Federal Reserve last week lowered the benchmark overnight lending rate between banks by three-quarters of a percentage point to 2.25 per cent.

However, confidence has been shaken at the beginning of what many term as a recession, and latest figures are not encouraging.