Economists' survey puts chance of 2008 U.S. recession at 50/50

Posted Feb 8th 2008 1:55PM by Joseph Lazzaro
Filed under: Forecasts, Recession

The U.S. economy will grow at a minuscule rate in Q1 2008 and the odds of a recession in 2008 stand at 50/50, according to a survey of economists conducted by Bloomberg News.

The 62-economist survey expects the world's largest economy to grow just 0.5% in Q1 2008, Bloomberg News reported. Meanwhile, the 2008 recession probability was increased to 50%, up from 40% in January 2008.

Economist Steve Affinito, who did not partake in the survey, told BloggingStocks Friday that 2008 looks like it will be the roughest election year, from an economic standpoint, since 1992.

Bearish, bullish forces

"We've got major contraction forces in the housing slump, the credit market crunch, and in high oil prices. Any one of those could cut growth substantially. Taken together, they can flatten economic activity," Affinito said. "On the stimulus side, we have 225 basis points of Fed rate decreases and a $168 billion fiscal stimulus package, so 2008 is shaping up to be a battle royal, economically speaking."

At this juncture, the bearish forces are stronger, Affinito said, which is why he's projecting 2008 U.S. GDP growth of 1.3-1.8%.

Further, Affinito said 2008 is likely to be "the economy's poorest performance in an election year since 1992," when employees and businesses did not begin to see the benefits from an ongoing economic recovery until late in the year. "It was a difficult economic circumstance that hurt incumbents running for elected offices that year," Affinito said.

Tags: 1992, 1992 election, 2008, 2008 election, bond market, consumer spending, credit markets, GDP, housing, inthenews, U.S. economy

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Reader Comments (Page 1 of 1)

2-08-2008 @ 3:22PM

Boards0000000 said...

Recession......that's a given. It's a Depression we're all worrying about.

2-08-2008 @ 5:34PM

jack said...

The so-called experts are reluctant to accurately describe the likely economic outcome. Of course we are entering a long and deep recession. Every leading indicator is predicting the outcome.

The sub-prime mortgage bottom is far from obvious. The lenders are short of cash to lend and have dramatically tightened lending criteria. With house prices doubled, down payments required, the PITI has more than doubled. This has eliminated the vast majority of potential middle class buyers. Gas prices are up over 60%. Food prices are up sharply. Take home wages are flat or negative. Inflation likely will begin to rise. Consumer debt is at a historic high.

Foreign markets are volatile.

All these conditions and more are predicting a long and deep recession. The stimulus package is too little and too late. With a $13 trillion economy, the tiny package will not be effective.