recess. break

Gov’ts weigh options; US in recession
BWorld/12.02.08

THE UNITED STATES economy has been in a recession for a year, the nation’s business cycle arbiter declared on Monday.

This development was followed by fresh actions worldwide yesterday to combat the financial crisis, with Australia slashing interest rates, European Union ministers seeking ways to boost investment and consumer spending, and the Bank of Japan moving to ease the plight of Japanese firms squeezed for cash.

Asian stocks tumbled and European markets got off to a shaky start as fear about the economic outlook gripped investors.

Finance ministers from all 27 EU nations gathered in Brussels to discuss a European Commission proposal for governments to spend an extra 1.2% of GDP.

The Reserve Bank of Australia cited the perilous state of the global economy when it cut the benchmark cash rate one percentage point to 4.25%.

Britain, the euro zone and New Zealand will almost certainly cut rates later this week. In addition to more rate cuts, the US Federal Reserve is weighing other responses with its benchmark rate nearing zero.

The Bank of Japan unveiled ¥3 trillion ($32 billion) in new measures to ease the squeeze in corporate funding. The BOJ will accept a wider range of corporate debt as collateral and launch a new scheme to make it easier for banks to make loans.

The global crisis has piled pressure on policymakers to ramp up their response. Fed Chairman Ben Bernanke said on Monday further cuts in the US benchmark rate below 1% were "certainly feasible."

Most of Europe and Japan are already in recession, and the United States has officially joined the club.

The National Bureau of Economic Research declared that the US recession began in December 2007. The current downturn, which many economists expect to persist through the middle of next year, is already the third-longest since the Great Depression.

Hopes that consumers may ride to the rescue appeared to be optimistic.

US post-Thanksgiving sales, which mark the traditional start to the holiday shopping season, looked less dire than feared but that did not stop investors from dumping shares of retailers. Analysts warned that while stores were crowded, the sales growth may have come at the expense of profits and overall demand remained weak. — reports by Reuters