US recession to last 14 mths

The Straits Times
Nov 18, 2008 | 9:12 AM
US recession to last 14 mths

WASHINGTON - THE US economy probably went into recession in April in a downturn likely to last 14 months, according to a survey of forecasts released on Monday by the Philadelphia Federal Reserve.

The 51 economists on average predicted an annualised drop in US economic output of 2.9 per cent in the fourth quarter and a 1.1 per cent decline in the first quarter of 2009, the Philly Fed said.

More than half of the panelists say their outlook is based on the assumption that Congress will pass a new stimulus package, with a size estimated at US$211 billion (S$321 billion).

According to the forecasters, the stimulus package will begin to affect real growth in the first quarter of 2009. They saw modest growth of 0.8 per cent and 0.9 per cent returning in the second and third quarters, respectively, improving to 2.3 per cent in the fourth quarter.

But they predicted unemployment will continue to rise to 7.7 per cent of the workforce by the fourth quarter of 2009.

The results were similar to a survey released earlier on Monday by the National Association of Business Economists (NABE), which predicted a 2.6 per cent contraction in fourth-quarter gross domestic product (GDP) and a 1.3 per cent decline in the first quarter of 2009.

The NABE panel also expected a modest 2009 rebound with growth averaging 0.7 per cent next year.

'Just over 60 per cent of the NABE respondents expect that the depth of the recession should be relatively contained, with a peak-to-trough decline in real GDP of less than 1.5 per cent, with the balance expecting a harsher contraction,' the organisation said. -- AFP