Prepare for even worse economy, forecasters say
Most polled think recession will last well into 2009
WASHINGTON - The country is sinking deeper into the economic doldrums, and it's likely to stay there for a while.
That's part of the latest outlook from forecasters in a survey to be released today by the National Association for Business Economics.
About 96 percent of the economists polled say a recession has started, and nearly three-fourths think it could persist beyond the first quarter of 2009.
Under one definition, a recession happens when the economy shrinks for two quarters in a row. The economy contracted 0.3 percent in the third quarter as battered consumers cut back sharply on spending, the government reported last month. It was the worst showing since 2001.
NABE economists, among other experts, predict activity will continue to shrink in both the final quarter of this year and the first quarter of next year as weary consumers hunker down further under the stresses of rising unemployment, shrinking nest eggs, and falling home values.
"Business economists became decidedly more negative on the economic outlook for the next several quarters as a result of the intensification of credit market stresses and evidence of spillover to the real economy," said NABE's president, Chris Varvares.
NABE economists are now forecasting the economy to shrink at a 2.6 percent pace in the final quarter of this year and at a 1.3 percent pace in the first three months of 2009. The new projections marked downgrades from the association's previous survey, which called for growth of 0.1 percent in the final quarter of this year and a 1.3 percent growth rate in the following quarter.
For all of 2008, the association's economists are predicting the economy's growth will slow to 1.4 percent, down from 2 percent in 2007. If the new, lower projection proves correct, it would mark the weakest performance since 2001.
The picture would turn worse in 2009. The NABE economists are projecting the economy will jolt into reverse, shrinking by 0.2 percent for all of next year. If that happens, it would mark the worst showing since 1991.
With the economy losing traction, the nation's unemployment rate will climb to 7.5 percent by the end of next year, the economists predict. Other analysts think it could rise to 8 percent at that time, or even hit 10 percent or higher if a US auto company goes under.
The nation's unemployment rate bolted to 6.5 percent in October, a 14-year high.
The NABE survey of 50 forecasters was taken Oct. 28 through Nov. 7.