Consensus estimates show that professional forecasters have turned sharply negative on their outlook for the economy for the rest of this year and 2009.
Real GDP will decline at a 2.6 percent rate in the final quarter of this year and will decline again in the first quarter of next year, by 1.3 percent, according to a panel of 50 professional forecasters surveyed by the National Association for Business Economics (NABE).
Altogether, the panel forecasts real annualized GDP growth of just 0.2 percent in 2008, down a full percentage point from its October forecast. Their forecast for GDP growth in 2009 was cut to just 0.7 percent from 2.2 percent last month. That would be the slowest growth over a two-year period since the early 1980s, according to NABE.
“A dimmer outlook for consumer spending accounted for most of the downward revisions to the overall economic outlook, reflecting a worse outlook for household wealth and income,” according to NABE.
Almost all of the NABE panelists, 96 percent, believe that a recession has already begun. Half say the recession started in the fourth quarter of 2007 or in the first quarter of 2008, although more than one-third believe that the recession began in the third quarter of 2008. Nearly 75 percent of the economists think the recession could persist beyond the first quarter of 2009.
They also expect unemployment to surge to 7.5 percent by the end of next year. The panelists also expect that investors will share the pain. The panel lowered its projected value for the S&P 500 index at the end of 2009 by 17 percent compared with the previous survey.
Still, a solid majority, 60 percent, of the survey 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 percent. The rest said they expect a harsher contraction.
The recession is expected to reach much of the global economy. Asked which countries were already in, or will soon slip into, recession, a majority of the panelists named the U.K. (82 percent), the Eurozone (82 percent), Japan (74 percent), Canada (58 percent), and Mexico (54 percent). Indeed, on Monday, a variety of news reports said that Japan’s economy had slid into a recession for the first time since 2001. According to the NABE panel, China and India are expected to avoid an outright contraction, though a deceleration appears likely.