Recession Fears Among Experts Grow As U.S. Economy Faces Slow Growth

Chances the United States will lapse into another recession rose over the past month to nearly one in three as the economy faces a number of road blocks that could derail already weak growth, a Reuters poll showed on Wednesday.

The consensus among economists for the probability of another U.S. recession in the next 12 months rose to 31 percent from 25 percent in the August Reuters poll.

The last time economists predicted a similar chance of recession was four years ago, in September 2007. One year later, investment bank Lehman Brothers collapsed and Western economies plunged into the Great Recession.

"The economy is dangerously close to stall-speed. There is no buffer, and even a moderate shock could derail the cycle," said Aneta Markowska, economist with Societe Generale.

The poll of more than 70 economists found respondents had slashed their growth forecasts from just a month ago, although the rate of growth was still expected to tick up in the second half of the year after a dismal first half.

The economy grew at an annualized rate of just 1.0 percent in the second quarter and experts see it improving modestly for the rest of the year, with somewhat stronger growth in 2012.

Economists forecast gross domestic product growing at an annualized 1.9 percent in the third quarter, lower than the 2.3 percent that was seen in the last poll. They slashed expectations for Q4 to 2.0 percent from 2.6 percent.

That suggests a recovery that is crawling along, but still vulnerable to jolts.

The escalating debt crisis in the euro zone is one of the biggest risks to the economy. Politicians have come under intense fire to do more to stop Greece from defaulting on its sovereign debt and lead the currency bloc out of the crisis.

U.S. President Barack Obama joined the fray on Tuesday, telling Spanish journalists that euro zone leaders needed to show markets they were taking responsibility for the debt crisis.

A Greek default could have domino effects for larger countries such as Spain and Italy.

JOBS CHALLENGE

Domestically, the world's biggest economy faces high unemployment, frail consumer confidence and jittery financial markets.

2012 is expected to start off with 2.0 percent growth, before rising to 2.5 percent by the second half of the year. There is also some optimism that a new jobs bill from President Obama could help the economy regain momentum.

"The Obama jobs plan has the potential to increase 2012 growth to the 3.4 percent to 3.7 percent range, if passed as is," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott.

However, there is uncertainty over the ultimate outcome, with Obama and the Republicans now fighting their third major budget battle of the year.

Confidence in lawmakers' handling of the economy was eroded by an acrimonious debate in the summer over raising the debt ceiling, which led to a downgrade of the United States' credit rating by Standard & Poor's.

Economists also nudged up their expectations for consumer prices. The consumer price index was seen averaging 3.5 percent in the third quarter, up from 3.3 percent earlier, and 3.2 percent in the final quarter, up from 3.1 percent.

The consensus for core inflation -- which strips out volatile items like food and gasoline, and is more closely watched by the Federal Reserve -- was also revised up a hair.

Expectations for third-quarter core CPI was lifted to 1.8 percent from 1.7 percent, and the fourth quarter was raised to 2.1 percent from 1.9 percent.

The U.S. Federal Reserve was seen keeping interest rates near zero through 2012 after the central bank said last month it expected to hold rates steady for at least the next two years.

(Polling by Namrata Anchan, Somya Gupta and Sumanta Dey; Editing by Ross Finley and Catherine Evans)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[stargazer13]

02:43 PM on 09/15/2011

they must of had ear plugs in their ears for the last 4 years

how else can you explain them being the last to know !!

I mean main street has been freaking beating pots and pans on this issue !!

eewwwhh to no avail I might add !!

[Chicago0048]

12:00 PM on 09/15/2011

The rich are still buying....you should see the luxury stores going up in Chicago....insane!

[witsendster]

11:34 AM on 09/15/2011

I am in retail. Just from my view in my small slice of the economic world, I cannot tell you how detrimental I feel the republican stonewalling was during the debt ceiling debacle. They single-handedly created this whole recession under the mismanagement during the Bush administration, and now they have thrown us back under the recession bus with their irresponsible posturing and obstruction during the debt ceiling debate. These fiscal "conservatives" hinder the economy and destroy confidence every time they open their mouths. I truly believe they are the single greatest detriment we face.

[Kye154]

10:40 AM on 09/15/2011

It is a train wreck happening in slow motion, and every economist worth his salt knows it. The government has been lax in regulating banks and Wall Street, otherwise, the first economic breakdown wouldn't have happened in 2007. The president has been 2 1/2 years too slow to do anything about the economy and jobs, and congress is at war with itself and the American people, and is about as dysfunctional as it can be. All the politicians are worried about the 2012 elections, and that leaves us without a life raft, (in otherwords, the newly appointed super congress needs to come up with substantial budget cuts, which means, Americans' welfare is going to take a back seat of getting anything).. So get ready to Great Depression II.

[Tygartman]

10:01 AM on 09/15/2011

Duhhhhhh....talk about stating the obvious.

[Raccoon1]

08:59 AM on 09/15/2011

The US put tariffs on steel. Domestic steel is hiring and building new mills.
The US put tariffs on tires. Domestic tire makers are doing well.

[First Blast]

12:38 AM on 09/15/2011

Higher prices, lower wages, fewer benefits, job insecurity = recession

[Lupin77]

12:07 AM on 09/15/2011

The country is already in a state of economic recession. Why not tell it like it is.

[sanfran55]

11:24 PM on 09/14/2011

The economy will not recover until the housing market approaches some semblance of normalcy. People can not sell their homes to relocate for jobs. People are terrified to buy homes amongst the falling prices and mortgage instabilities. Prices still remained unlinked to people's salaries in some bubble areas. Then there are also high property taxes and HOA fees in many areas. Such a mess.

[Chicago0048]

12:04 PM on 09/15/2011

The states are stepping into the housing fiasco and suing mortgage companys; getting the mortgage companies to hand over foreclosed homes so they can be rehabbed and resold. If we wait for the Feds to fix things, it will be another 10 years. The states have to step up.

[Joseph Joyal]

05:01 PM on 09/14/2011

Reality check folks, jobless recovery mean the recession never ended it was just slowing down. I have said for the past few years we must have jobs to end the recession. But those in DC both parties play games with our lives and lively hoods.
The best and fastest way to end this would be to stop the NAFTA with Mexico, it has always been a one sided trade pact. Any other free trade agreements must not happen.
The next thing is to get oil prices under control. This will best be accomplished by taking oil and natural gas off of the commodities markets to much speculation and price fixing happening there.
No jobs no recovery plain and simple. and not McJobs

[Scott EngageAmerica]

04:15 PM on 09/14/2011

While Obama's jobs proposal might have be a step in the right direction, and even if the most bullish estimate is correct, every job created would cost on average over $200,000 each. Republicans were already speaking out against tax increases and the Democrats are criticizing portions of the bill as well. The White House is now saying it is willing to pass the bill in parts. If the Obama administration is now willing to pass parts of the bill, it is likely the Republicans in the house will not vote for the rest.

The original proposal lacked focus on the problems that got us into the situation. And, passing only pieces does not seem to be a way to create sustainable job growth.

[Chicago0048]

12:13 PM on 09/15/2011

His jobs bill is a rehash of what he's been proposing in the past. A retread. Same thing over and over. Nothing happening.

He should give it up, let the markets take over, go on a foreign aid trip, visit the troops, leave the country, just disappear on "official" business and let the Congress figure it out. Regardless of what he does, it won't work, it won't pass, they don't want him in office.

[BobbyKearan]

04:00 PM on 09/14/2011

People voted the Republicans back into control in 2010 - what did they expect? Something different than the last time they were in power?

The GOP is dead set on ruining the country for their own gains.

[Tygartman]

10:03 AM on 09/15/2011

Republicans control 1/2 of 1/3 of the government for 8 1/2 months and it's all their fault. Riiiiiiiiiiight. What about between Jan. 2009 to Jan. 2011 when thr Dems controlled everything?

[BobbyKearan]

10:34 AM on 09/15/2011

You seem to purposefully forget the 8 years the Republicans were in control - the six years they had both houses and the presidency that lead up to the recession. What about between 2001 and 2007? You recall 2007, when the economic collapse hit hardest. Democrats were voted in BECAUSE of the economic collapse, they didn't cause it. Democrats were in control for two years AFTER the collapse and you want to blame them for it? ROFLOL! Or for not correcting the previous 8 years in only two?
http://en.wikipedia.org/wiki/National_debt_by_U.S._presidential_terms
In Bush's first year, he increased federal spending by 6% - Obama's first year, spending decreased by 2.4% Bush raised spending every year. Wiping out the budget surplus Clinton left that could have paid down the debt - but he repeated the "Debt doesn't matter" line.

Republicans drove the economy into the ditch, we stopped digging the hole and were getting out of the ditch, but they got back a little power and are trying to start the same policies that got us here in the first place while preventing any recovery.

[thefacts22]

03:29 PM on 09/14/2011

You dont need to be an economist with a Harvard Degree, to realize and know that this is NOT THE TIME to invest in anything. Between obama care uncertainties and the hundreds of new regulations no one knows if we are coming or going. Most likely next year our unemployment will grow even with the new plan of job abomination stimulus. We simply do not have money! and We simply do not have the investors!

[Sergeant]

01:47 PM on 09/14/2011

“We have tried spending money. We are spending more than we have ever spent before and it does not work.”

The words are those of Henry Morgenthau Jr. — close friend, lunch companion, loyal secretary of the Treasury to President Franklin D. Roosevelt — and key architect of FDR’s New Deal

[cue]

03:13 PM on 09/14/2011

Ah, but it did work. I'm not sure when Hank made that comment but, having been on a precipitous downward path since 1929, GDP decline slowed from 1932 to 1933 and then started growing right up until the deficit hawks convinced congress to rein in spending in 1937. GDP fell in 1938 and only started growing again in 1939 when we started spending again to support the war efforts in Britian and France.

Don't believe everything you hear from someone just because they have an impressive last name.

[des946]

01:18 PM on 09/14/2011

I think that "common sense" tells us that the economy is going to slow down further . . . it almost has to. We have a situtaion where the banks and the major corporations are sitting on records amount of cash reserves; but that certainly isnot creating jobs or stimulating the economy. The creation of jobs to provide decent incomes sothat indivduals and familes can cover their basic costs of living and have "disposable incomes" needed to stimulate the economy is the ONLY SOLUTION . . . and the creation of jobs, via the private sector, is something that does NOT "happen over night"; it takes a matte of YEARS to create permanent decent paying jobs. Perhaps if people quit buying high priced, name brand products (like NIKI footware) that are cheaply made in foreign coutries, that might help stimulate U.S. manufacturing, and the creation of jobs.

With the glut of residential and commercial properties, and the massive amount of bad mortgages that STILL have not been revealed or addressed, and the rising unemployment, etc., etc., etc., it is going to be at least SEVERAL YEARS before the econmy bottoms out and real recovery can begin. This is just something that we are going to have to work through the best that we can. And meanwhile, yesterday there was an article about how Americans are going into credit card debt more than ever, even during the boom times . . . that is NOT a positive sign.