Recession fears stalk America

By Matthew Price
BBC News, New York

Fears of a downturn are widespread across the US

It is 0900 as the M-train from Manhattan rattles and squeals its way across the Williamsburg Bridge.

Below, New York's East River swells and surges grey and cold. The train slows to a halt, and a handful of people get out.

The roads from the subway station are lined with old warehouses.

Graffiti is scrawled across much of the brickwork.

Inside one of the buildings is the Brooklyn Brewery - where they make one of the top draft beers in the city.

There are pressures from every direction - it's a perfect storm Steve Hindy Brooklyn Brewery

On the floor by the warehouse doors are some sacks of grain. Malt from England is embossed on the sacks in red ink.

The brewery imports the grain, and that is proving expensive these days.

"There are pressures from every direction. It's a perfect storm. We've got a weak dollar," says Steve Hindy, who helped set up the company in the late 1980s.

"We've had bad hop and barley crops around the world, and the government here is forcing farmers to grow corn for ethanol. [There are] higher fuel prices. We're being hit from all directions."

R-word

There is a silver lining. The weak dollar does make their beer cheaper to overseas markets, and their exports are growing, but that is a small cushion when you look at the overall picture.

The construction sector is particularly hard hit

Across this country, from the industrial areas to the financial centres, there is one word being heard more and more - recession.

Technically a recession is two quarters of negative growth.

So far the US has not even registered one such quarter yet, but the word is being used more frequently because of a deluge of depressing statistics that now seem to come out every week.

The latest jobless figures are worse than expected: 63,000 jobs were lost in February. The big losses were in construction, manufacturing and retail.

Also this week it was announced that home repossessions are higher than ever.

In fact, pick any statistic: house values are falling, retail sales are down and oil has hit record prices, making economic activity more expensive.

Global repercussions

What does it all add up to?

As the US goes into recession it will definitely have an impact on the Europe, on Japan, and even on China Nariman Behravesh Economist

Well the man who has just been confirmed as the world's richest person, the billionaire investor Warren Buffett says the US is already in a recession.

Plenty of others agree. "We're definitely in a recession," Nariman Behravesh, chief economist at Boston's Global Insight says.

"The question is, is it a mild recession, or is it something worse than that? Our best bet is that it's a mild recession and that in the first half of the year the economy will contract a little bit, but then by the second half - especially with these tax cuts that are due to come in - we'll see a rebound."

That may calm some nerves but, recession or not, most see it getting worse and that is going to affect people far beyond these shores.

"I think the rest of the world should be very worried," says Mr Behravesh.

"There was all this sort of nonsense about de-coupling from the US, but the US is too big both in terms of the size of its economy and its impact on financial markets."

"As the US goes into recession it will definitely have an impact on the Europe, on Japan, and even on China."

Monetary expansion

Can anything be done to stop the slide?

The US central bank, the Federal Reserve, has slashed interest rates recently, and may do so again this month. It is hoping to stimulate borrowing and spending by doing so.

It also announced today that it would make more money available to the big banks to ease credit pressures.

The president has for some time admitted that he is worried. After the latest job figures came out George W Bush made a quick statement.

"Losing a job is painful, and I know Americans are concerned about our economy. So am I."

"It is clear our economy has slowed, but the good news is we anticipated this and took decisive action to bolster the economy by passing a growth package that will put money into the hands of American workers and businesses."

The hope is this will help stave off recession. Like the positive effect of the exchange rate on exporters it may play a cushioning role.

Many, though, fear it may come too late to have any real impact on what looks, every day, like an increasingly desperate situation.