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news.ft.com
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US may have entered recession
By Peronet Despeignes and Stephen Fidler in Washington
Published: June 24 2001 20:34GMT | Last Updated: June 24 2001 21:09GMT
The US may have already stumbled into its first recession in a decade, according to the National Bureau of Economic Research, the official arbiter of the country's business cycles.
In a departure from its recent statements, the bureau says for the first time that "data normally considered by the committee indicate the possibility that a [US] recession began recently".
The bureau has issued a series of statements on the economy's condition since recession jitters surfaced last year and has repeatedly denied that US economic conditions met the definition of recession.
In its latest memo, posted on its website and dated June 18, the NBER stops short of officially declaring recession. "The economy has not declined nearly enough to merit a meeting of the [recession-dating] committee or the determination of a peak date," it says.
Paul O'Neill, the US Treasury secretary, reiterated his view that the US had dodged a recession. He said this was due to tax cuts, which would soon return money to taxpayers, and to lower interest rates, which would start to benefit the economy after the usual time lags.
He told ABC Television's This Week programme: "It's easy to find gloom and doom. [But] consumers are hanging in there. The spending rates are still quite good."
In the US's last recession, Alan Greenspan, the Federal Reserve chairman, denied the nation had entered a recession several times in 1990 before acknowledging it in January 1991. The last recession actually began in July 1990, a date set by the NBER committee in April 1991 - a month after the recession ended. The NBER is a fact-finding, rather than forecasting, committee.
The Fed is widely expected to reduce rates by as much as a half-point when its meets tomorrow and Wednesday in its ongoing campaign to suppress recession risks.
The NBER memo says the fall in US employment this year is "a small fraction" of that typically found in recessions and the drop in manufacturing output "has not spread to other sectors".
Recessions have been wrongly called before - during the Federal Reserve's 1994-95 monetary tightening and, most recently, the 1997-98 global financial crisis - labelled months after the fact.
Fed officials have privately expressed concern about the persistent glut of inventories in the US and the excess of production capacity, by the Fed's own measure the greatest in nearly two decades.
The central bank's monetary easing this year - the most aggressive since Mr Greenspan became chairman - began in January, culminating in a 250 basis point reduction over six months.
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