Banking giant warns US economy in recession

Published on Tuesday 8 January 2008 09:20

WALL Street banking giant Merrill Lynch claimed today that the United States, the world's biggest economy, was in recession for the first time in 16 years.

The bank's chief American economist David Rosenberg – who is widely respected on Wall Street – said a batch of economic data pointed to recession.

Merrill's point of view may be some way off being confirmed, with the country's National Bureau of Economic Research possibly waiting for around a year to draw any firm conclusions from the latest data.

President George Bush insisted that the US economy had a "strong foundation". But he warned that continued growth cannot be taken for granted.

Mr Rosenberg said figures on retail sales, manufacturing, personal income and employment backed up Merrill's claim.

He said that these four main barometers used to gauge the health of the economy "seem to have peaked around the November to December period, strongly suggesting that we are actually into the first month of a recession".

Normally, a recession is declared after two quarters of decline.

"According to our analysis, this (recession] isn't even a forecast any more, but is a present-day reality," he said.

But other observers disagreed, with rival bank Lehman Brothers issuing a document stating ten reasons why the US economy would not fall into recession.

However, Mr Rosenberg insisted recession was not about "labels".