The Obama administration inherits an economy in freefall, contracting at an annualised rate of roughly 5 per cent in the fourth quarter of last year and likely to shrink further, at least through the first half of 2009.

The financial sector is still seriously impaired, the flow of credit to the economy is tight, consumers are pulling back, business is retrenching sharply and the lifeline from strong exports has snapped with gathering weakness abroad.