Washington  - The US Federal Reserve painted yet another depressing picture of the state of the world's largest economy on Wednesday as plunging December retail sales told of a dismal holiday season for US retailers.

The US central bank warned Wednesday that economic activity was continuing to weaken across nearly all regions of the country going into 2009, according to its so-called Beige Book update on the economy.

Housing, manufacturing and services industries all declined in most parts of the country. The Fed said retailers and carmakers suffered most during the holiday season.

Retail sales in the United States plunged in December as holiday shoppers cut back in a recession and ignored big sales incentives, the Commerce Department said in its initial estimate Wednesday.

Sales tumbled to 343.2 billion dollars, down 9.8 per cent compared to December 2007 and down 2.7 per cent from November, worse than economists expected.

US retailers have suffered their worst holiday shopping season in decades, failing to lure in shoppers despite offers of savings and other incentives ahead of Christmas.

The December figures represented the sixth consecutive monthly fall in sales, the longest stretch since 1992. Sales between October and December plunged 7.7 per cent compared to the fourth quarter of 2007.

Carmakers earlier this month reported a drop of more than 35 per cent in December sales compared to the same month in 2007. (dpa)