Source: Bloomberg.com
The U.S. economic slump will extend into 2009 as the longest expansion in consumer spending on record comes to an end, according to a Bloomberg News survey.The world’s largest economy will grow at an average 0.7 percent annual pace from July through December, half the gain in the first six months of the year, according to the median forecast of 50 economists surveyed from Aug. 1 to Aug. 8.
Household spending, which has grown every quarter since 1992, is projected to stall in the last three months of the year as the impact of tax rebates fades, wages fail to keep up with inflation and property values fall. The jobless rate, now at 5.7 percent, will reach a five-year high of 6 percent in early 2009.
“The consumer is very much squeezed,” said John Lonski, chief economist at Moody’s Investors Service Inc. in New York. “The downside risks swamp whatever the economy’s upside potential would be.”
Spending is likely to grow at a 0.6 percent annual pace from July through September, down from a 1.5 percent pace in the previous three months when the arrival of almost $78 billion in tax rebates helped Americans overcome the surge in fuel and food prices. Most of the remaining rebate checks were sent out by mid July.
Analysts say the impact of the rebates, part of a $168 billion economic stimulus plan President George W. Bush signed in February, will be gone by the fourth quarter.
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