Economists see U.S. GDP slump extending into 2009

Posted Aug 11th 2008 12:50PM by Joseph Lazzaro
Filed under: Forecasts, Bad News, Economic Data, Recession

The U.S. economic slowdown is likely to extend into 2009, as the nation's longest expansion in consumer spending subsides, economists in a new Bloomberg News survey predicted.

Further, economists surveyed expect the world's largest economy to grow at a 0.7% annualized rate in Q3 and Q4, or about one-half the GDP of the first-half of 2008. The survey of 50 economists was conducted August 1-8.

Economist Glen Langan, who did not participate in the Bloomberg News survey, said Monday he's watching the export segment for signs of further slowing. "Up to now, U.S. export activity has been able to keep U.S. GDP positive. But if exports slow in conjunction with the housing slump and a pull-back in consumer spending, the next 12 months could see additional slowing," Langan said. "An already clouded economic picture could become more stormy."

Keep an eye on U.S. export data, Asia GDP

Langan added that tell-tale signs of slowing exports will be Q3 GDP from emerging market economies, particularly in Asia. Economists and investors/traders will also receive a snapshot of June export data when the U.S. Commerce Department releases U.S. trade balance data Tuesday at 8:30 a.m. EDT.

Concerning household spending, economists in the Bloomberg News survey expect it to stall in the final three months of 2009, as the impact of U.S. tax rebates fade, and as wages fail to keep up with inflation. Further, these economists expect U.S. GDP to total 1.6% in 2008 and 1.5% in 2009.

Langan said he expects 2008/2009 U.S. GDP at about the same levels, or approximating a growth-recession growth rate. "The U.S. needs a catalyst to generate higher GDP growth, and right now there isn't one in sight," Langan said.

Economic Analysis: After one of the weakest expansions in the post-World War II era, the U.S. now faces the prospect of a growth-recession (or worse). Moreover, the U.S. economy is, arguably, in its worst shape heading into a U.S. presidential election since 1992. Further, as economist Langan noted, a catalyst will be needed to get the economy growing at capacity again.

Tags: consumer spending, emerging markets, exports, gdp, inthenews, job creation, jobs, trade, U.S. economy, wages