U.S. in recession as Europe backs hikes

By Emily Kaiser

WASHINGTON (Reuters) - The U.S. economy has been in a recession for a year, the nation's business cycle arbiter declared on Monday, while European leaders vowed to step up public spending to try to cushion a deepening downturn.

Economic data showed factories were slashing output in the United States, Europe and China last month as demand dropped, boosting expectations that central banks around the world will keep lowering short-term interest rates in the coming weeks.

U.S. Federal Reserve Chairman Ben Bernanke said further interest rate cuts were "certainly feasible" and cautioned that the economy would probably remain weak for a while.

The Bank of Japan called an emergency meeting for Tuesday to find ways to cut corporate borrowing costs. BOJ Governor Masaaki Shirakawa warned that access to funding was becoming increasingly tough for Japanese firms, to an extent comparable to a debilitating credit crunch a decade ago.

In a sign of how drastically the deepening economic gloom was curbing demand, U.S. manufacturing in November fell to its weakest in 26 years. A similar reading on euro zone factories sank to a record low.

China's manufacturing sector also slumped in November as new orders tumbled, showing the world's fourth-largest economy was being sucked deeper into the global maelstrom.

"Miserable readings from other manufacturing indexes around the world today -- in China and throughout Europe -- emphasise the depth of the global downturn," said Nigel Gault, chief U.S. economist at IHS Global Insight.

The financial crisis that began with a U.S. housing market collapse last year has already knocked most of Europe and Japan into recession, and the United States officially joined the club on Monday.