Japan became the latest major country to fall into recession Monday as economists suggest the U.S. has also entered arecession which would persist into next year.
Global economic fears deepened after a Washington summit offered markets scant hope for action to contain the damage. The G20, grouping developed and developing countries, stopped short of announcing specific steps such as coordinated stimulus spending.
"In the midst of an emergency crisis, to have a statement that reads ‘We will cooperate with each another’ is all but meaningless," Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp, told AFP.
"Market sentiment has soured, with all eyes back on the theme of global recession," he added.
MARKET PLAYERS PESSIMISTIC
The U.S. has entered a recession that will persist into next year, and economies around the world will follow suit, according to a survey of business economists.
After growing 1.4 percent this year, the U.S. will contract 0.2 percent in 2009, according to the median estimate in a poll taken by the National Association for Business Economics (NABE).
According to NABE, which surveyed a panel of 50 experts, the U.S. economy will grow a mere 0.2 percent this year. The group had forecast growth of 1.2 percent in October.
A full 96 percent of the economists believe the economy is in a recession and nearly three-fourths think the recession could persist beyond the first quarter of next year.
In a sign that economic conditions will remain difficult for some time, the group slashed its growth outlook for 2009 to 0.7 percent from 2.2 percent last month.
"Business economists became decidedly more negative on the economic outlook for the next several quarters as a result of the intensification of credit market stresses and evidence of spillover to the real economy," Chris Varvares, the NABE's president said in a statement.
JAPAN OFFICIALY IN RECESSION
There was no let-up in the flow of bad economic news. Official data showed Japan, the world’s second largest economy, contracted 0.1 percent in the third quarter, following Germany, Italy and Ireland into recession.
The last time Japan was in recession -- usually defined as two or more consecutive quarters of economic contraction -- was in 2001 after the Internet bubble burst.
The Bank of France predicted Monday that the French economy was likely to contract by 0.5 percent in the last quarter of the year, leaving growth for the year at just 0.9 percent.
France, which narrowly escaped recession with growth of 0.1 percent in the third quarter, vowed to make fighting a looming recession a top priority, notably with fresh stimulus spending and help for the auto industry.
CAR MANUFACTURERS STRUGGLE
The parlous state of the U.S. auto industry was also threatening car manufacturers elsewhere.
German Chancellor Angela Merkel was due to hold crisis talks with executives at car maker Opel, which has said it needs state guarantees for its bank loans as its U.S. parent company, General Motors, struggles to stave off bankruptcy.
But German Finance Minister Peer Steinbrueck ruled out a financial rescue package for the auto sector.
"An economic program for the entire automobile industry makes no sense," Steinbrueck told the mass-circulation daily Bild, stressing that the state is "not responsible for errors committed by industrialists".