NEW YORK, Feb 28: The downturn in the world stock market led by China may have caused a tremor which the economic analysts here say is harbinger of a recession looming ahead.

Although on the Wall Street the stocks are showing signs of recovery after the fall on Tuesday but it was caught off guard when the US Commerce Department reported on Tuesday morning that orders for durable goods plunged almost 8 per cent last month.

Noting that 8 per cent drop was a big one, the New York Times analyst, David Leonhardt said on Wednesday, “but it really shouldn't have come as too much of a surprise. In two of the last three months, the manufacturing sector has shrunk, according to surveys by the Institute for Supply Management (ISM) that have been out for weeks.”

But the new report seemed to focus investors’ attention on the problems in manufacturing and became one more reason for people to sell stocks. By the time the market opened in New York, stocks in almost every industrialised country had already fallen sharply, Leonhardt says.

“All of which raises a question that would have sounded strange even a month ago. Is the entire United States economy in danger of going the way of the manufacturing sector? Is it possible that we’re headed for a real recession?

The Times points out that “for months now, the economy seemed to shrug off the forces weighing on it and just kept on growing. But those forces never went away. If anything, a number of them have gotten stronger. And that’s the most worrisome part of the bad news from the nation’s factories: it fits into a larger story.”

Mr Leondardt writes as stocks were dropping on Tuesday morning, an economist named Ian Shepherdson wrote one of his regular e-mail messages to clients: “Manufacturing is in recession; Fed please take note.” Mr Shepherdson, it’s important to mention, is not one of Wall Street’s perma-bears. When manufacturing last shrank, back in 2003, he correctly insisted that it was a false harbinger.

But this time, the manufacturing downturn stems from a couple of larger economic problems. One, of course, is the housing slump, which has caused a big drop in new construction and much less demand for doors, windows, countertops and a lot of other things that kept factories busy in recent years.

The second big problem for manufacturers is the series of interest rate increases that the Federal Reserve has imposed since 2004, the Times said.

Meanwhile, on Wall Street the dollar advanced from a 10-week low against the yen and rose versus the euro after US Federal Reserve Chairman Ben S. Bernanke said it is “reasonable” to expect stronger growth in midyear.

The US currency also benefited as the nation's stock markets rebounded after the biggest drop in four years yesterday following a sell-off in emerging market assets.