US economy seen contracting in fourth quarternews
12 December 2007

Mumbai: The US economy will contract slightly in the fourth quarter, registering the first decline in output since 2001, Merrill Lynch economists have said.

US gross domestic product (GDP) will shrink 0.1 per cent in the last quarter of the current year, following surprisingly robust third quarter growth of nearly 5 per cent, David Rosenberg, Merrill Lynch's chief economist for North America, said in a research note.

"Investors need to be aware that an outright decline in GDP this quarter is a very real possibility," he said.

Another major Wall Street firm, Morgan Stanley, also said the US economy is likely headed for a recession, pulled down by tighter credit markets.

Warren Buffett, the third richest person in the world, meanwhile, told CNBC Television on Monday that the US economy can slide into a recession if the increasing unemployment rate

"If unemployment picks up then we could be in for a recession," Buffett said in an interview.

The US unemployment rate in October rose to the highest level since August 2006, and was steady at 4.7 per cent in November.

Buffett also pointed to the lacklustre holiday retail sales, which analysts view as a key safeguard, preventing a weaker US economy from sliding into recession as the housing market continues to fall and the banking sector is held down by credit woes.

Buffett's comments came after the US Federal Reserve cut its key interest rate for the third time in a bid to pump liquidity into a market blown up by the subprime mortgage crisis.

US authorities blame China and its currency for much of America's economic woes.
US trade deficit with China has ballooned to $23.8 billion in September, up 5.5 per cent from August, according to the latest US trade figures.

China, however, claims the deficit reflects the structure of the US economy.

In remarks made on the sidelines of a two-day "strategic economic dialogue" with senior US officials near Beijing, Chinese vice commerce minister Chen Deming said while China was not opposed to a stronger yuan, exchange rate changes can only play a supporting role in reducing economic imbalances.

Chen said China and the United States hoped to narrow the imbalance in trade between the two countries mainly by boosting US exports.

Noting that US consumers have benefited from cheap imports, he urged the United States to remain open to Chinese trade and investment.

also see :

 search domain-b
US economy seen contracting in fourth quarter