US officially enters recession

The US recession, which observers worldwide have predicted for months, has officially begun.

The National Bureau of Economic Research, an official panel of senior economists, has declared that the US entered recession in March this year.

We will do everything we can to enhance a recovery

President George W Bush

Since then, the decline in the US economy has been further undermined by the 11 September terrorist attacks on Washington and New York.

The US economy has suffered 10 recessions since the end of World War II, the last of which was in March 1991.

The past 10 years of economic growth have been the longest period of expansion in US history, the NBER said.

July recovery

But the US economy is likely to recover by July 2002 according to information on previous post-war recessions, NBER committee member Ben Bernanke said.

"Based on past experience, we expect the turnaround to begin anytime from now until July," Mr Bernanke told the BBC's World Business Report.

NBER's measures of a recession

Employment

Income

Industrial output

Wholesale sales

Retail sales

The last US recession stretched from the middle of 1990 to March 1991 after which the record period of expansion began.

The NBER scrutinises monthly figures for employment, income, industrial output and wholesale and retail trade.

Other economists technically define a recession as a six month period of negative growth.

Senate action needed

"We will do everything we can to enhance a recovery," said President George W Bush, whose father lost the White House partly as a result of the last US recession.

The White House on Monday renewed its appeal for the Senate to pass an economic stimulus plan.

Failure to act in the Senate risks prolonging a recession

White House spokesman

Speaking shortly before the NBER's official announcement, White House spokesman Ari Fleischer said:

"The Senate needs to act so that the economy can recover. Failure to act in the Senate risks prolonging a recession."

The news came on the same day as US retail sales over the holiday period gave some cause for renewed optimism about the economy's health.

The American economy is heading for a recovery, said Treasury Secretary Paul O'Neill.

"That's a measure of the past... what matters is going forward," Mr O'Neill said when asked about the NBER's statement on a recession.

Share reaction

But some analysts say the US economy will show negative growth of 1.5% between October and December.

That's a measure of the past ... what matters now is going forward

Paul O'Neill
US Treasury Secretary

And the government is due to revise its estimate of Gross Domestic Product (GDP) between July and September on Friday, with some expecting a downward revision to -1% from -0.4%.

US shares fell into the red from their early gains after the NBER announcement.

But the falls were cushioned by rising expectations of a stimulus package and the positive news from the retail sector.

And the Dow Jones Industrial Average of leading US shares pulled itself back into positive territory to close 23 points higher at 9,983.