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Buffett said in an interview with cable network CNBC the reports he gets from the retail businesses his holding company owns show a significant slowdown in purchases.
The chairman and CEO of Omaha-based Berkshire Hathaway Inc. said millions of people have also lost equity in their homes because home prices have dropped.
"I would say, by any commonsense definition, we are in a recession," Buffett said on CNBC.
But Buffett said it's not clear how far the recession will go because that is difficult to predict.
The technical definition of a recession most economists use is two consecutive quarters of negative growth in the nation's gross domestic product.
On Thursday, the Commerce Department reported that the gross domestic product increased at a low 0.6 percent pace in the quarter that ended Dec. 31.
In the July-September quarter, the economy grew at a brisk 4.9 percent.
Gross domestic product measures the value of all goods and services produced in the United States and is the best barometer of the country's economic health.
A survey released last week by the National Association for Business Economics showed that 45 percent of economists are predicting a recession in 2008.
But Buffett said the U.S. economy will be fine in the long run.
"Over time, my children are going to live better than I do, although they don't believe it," Buffett said.
Buffett's appearance on television came on the heels of his annual letter to shareholders, which he released Friday along with Berkshire's 2007 financial report.
In the letter, Buffett predicted that the insurance industry will see lower underwriting profit margins in 2008 because premium prices are down, and the industry's luck will certainly change.
"It's a certainty that insurance-industry profit margins, including ours, will fall significantly in 2008," he said. "Prices are down, and exposures inexorably rise. Even if the U.S. has its third consecutive catastrophe-light year, industry profit margins will probably shrink by 4 percentage points or so.
"If the winds roar or the earth trembles, results could be far worse."
Buffett said Berkshire's insurance group, which includes GEICO, reinsurance giant General Re and several other firms, generated $2.2 billion net income from insurance underwriting in 2007. That's down from the previous year when it posted a $2.5 billion underwriting profit.
When Berkshire's shareholders aren't worrying about insurance profits, they're likely fretting about who will run Berkshire after Buffett is gone. The 77-year-old Buffett offered a few new clues in his annual letter and during the CNBC interview.
To replace Buffett, Berkshire plans to split his job into three parts -- chief investment officer, chief executive officer and chairman.
Buffett wrote in his letter that over the past year he identified four investment managers outside Berkshire who could take over managing the company's $75 billion stock portfolio and investing its $44.3 billion cash.
Buffett said on CNBC that none of the four CIO candidates is a woman and that very few women applied for the job.
Buffett has previously said that Berkshire's board had three outstanding internal candidates for chief executive. And Buffett's son, Howard, who already serves on Berkshire's board, will become chairman after Warren Buffett's death.
Buffett also said on CNBC:
-- That he doesn't agree on everything with his favorite presidential candidates, Democrats Hillary Clinton and Barack Obama, and he wouldn't want either one to succeed him as Berkshire's chief capital allocater. "I would certainly appoint either one of them to run a business, but running a business is a little different than my job."
-- On why the U.S. trade deficit is a long-term problem. "Over time, it's like eating an extra 100 calories at every meal. You don't sit down at the table and get up and everybody says 'My God, you're fat.' But if you keep doing it over time, pretty soon they'll say, 'My God, he's gotten fat.'"
-- On stock bargains now: "Certainly, I find more things to look at now than I did six months or a year ago. But I would say it's changed more dramatically in the fixed-income market than it has in the equity market."
-- On the cause of the credit crisis: "The mistake was in lending unwisely. There were a lot of dumb lending practices."
Berkshire owns more than 60 subsidiaries including insurance, clothing, furniture, natural gas, corporate jet and candy companies. Berkshire also has major investments in such companies as Coca-Cola Co. and Wells Fargo & Co.
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