US slipping into recession: Federal Reserve

NEW YORK, October 15, 2008 (AFP) – The United States has slipped into recession, the head of the San Francisco branch of the Federal Reserve, the nation’s central bank, said.

“The recent flow of economic data suggests that the economy was weaker than expected in the third quarter, probably showing essentially no growth at all,” said Janet Yellen in an address in Palo Alto, California.

“Growth in the fourth quarter appears to be weaker yet, with an outright contraction quite likely,” she said. “Indeed, the US economy appears to be in a recession.”

Yellen spoke just hours after official data showed the budget deficit tripled in size in the 2007-08 accounting year to 455 billion dollars, or 3.2 percent of gross domestic product.

Her remarks also followed a dramatic period that saw the US government, for the first time since the Great Depression, partially nationalize major banks in its latest move to restore confidence to badly-shaken financial markets.

Economic downturns are a double blow for government budgets because they reduce tax revenue for governments and increase the need for social security spending in the form of unemployment benefits.