The US is set to claw its way out of recession next year, dragging much of the world with it, as it struggles back from the Sept. 11 terrorist attacks, experts say.
The airborne suicide onslaught flattened the World Trade Center and killed thousands, but it also dealt a resounding blow to US consumer and business confidence, wreaking havoc on the economy.
Since then, the US authorities have turned all their ammunition loose on the recession, which officially began in March. And their determination looks set to pay off in the year ahead.
US President George W. Bush and the Congress have enacted a US$40 billion rebuilding fund and a US$15 billion airline rescue package.
Another massive economic stimulus package -- possibly up to US$73 billion -- is stuck in the US Senate.
Big tax cuts had been passed before the attacks.
The Federal Reserve, meanwhile, has dramatically cut interest rates.
It lowered the key federal funds target rate, governing lending rates between banks, 11 times in 2001, including four cuts after the terrorist disaster.
The rate now stands at 1.75 percent. It began the year at 6.50 percent.
"You have got this tailwind in monetary policy that is just extraordinary that is only going to begin to hit in its full force, a gale wind, in January," Banc One economist Diane Swonk said.
Interest rate cuts only take full effect 12 to 18 months after implementation, she said.
"We have got all the good stuff still ahead of us and stuff that is not so good to wade our way through, which is going to make the first quarter rocky," Swonk said.
"But we should be well on our way back to recovery next year and those who are looking for this muggy, sloppy recovery -- I just don't see it," she added.
Gross domestic product in the world's biggest economy slid 1.1 percent in the July to September quarter, the biggest dive in a decade, and most economists expect a further contraction in this quarter.
But the economy is widely expected to enter an accelerating recovery period next year, fuelled by lower rates, higher government spending and the need to re-stock dwindling inventories.
"Global economic dynamics in 2002 depend on the timing and character of the US recovery," Merrill Lynch chief economist Bruce Steinberg said in a report.
The attacks took a heavy toll on US workers, he noted.
A total 799,000 jobs evaporated in October and November as the unemployment rate climbed to 5.7 percent from 4.9 percent, but latest figures have offered some hope.
The number of people making new claims for state unemployment benefits dived 86,000 to 394,000 last week.
US factories did better than feared in November. And stockpiles of unsold goods fell dramatically the previous month, opening up the prospect that businesses will have to order more.
"The US recession is likely to continue for several more months," Steinberg said.
"The problem is that profit margins probably fell to post-World War II lows in the fourth quarter, which is why earnings have had such a total collapse," he said.
"Payrolls must be cut further to restore profitability. That process probably still has some months to run. Consumer spending will be weak while such job loss is occurring," Steinberg added.
"Ultimately, however, a strong recovery should take off."
The US recession would linger into winter, with a recovery by spring, Steinberg said.
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