Dire predictions of US recession

THE US economy, traditionally the engine room for the world, is in a recessionary tailspin.

At least according to US analysts' increasingly dire predictions.

While the Bush Administration insists recession will be avoided, economists almost daily are lifting the odds.

Australian analysts are taking a sunnier view and mostly expect a slowdown but not a full-blown US recession – usually defined as two straight quarters of negative economic growth.

Recession talk erupted after the US unemployment rate, released last week, rose sharply in December and manufacturing activity sank to the level that signals a contracting economy.

The key concern is that the crisis that began early last year with the collapse of assets linked to high-risk mortgage borrowers, a small part of the mortgage sector in the US, is spilling into the broader economy, causing businesses to axe jobs and US consumers to cut off the spending lifeline holding their economy afloat.

US consumer spending is responsible for about two-thirds of America's economic activity.

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