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Worsening Spending Slump Paces ‘Scary’ U.S. Recession

Posted By admin On December 10, 2008 @ 11:34 am In Money Watch | Comments Disabled

Shobhana Chandra and Andy Burt
Bloomberg [1]
Wednesday, Dec 10, 2008

The biggest slump in U.S. consumer spending since 1942 will extend the recession and push the jobless rate to the highest level in a quarter century, according to economists surveyed by Bloomberg News.

Household spending will drop 1 percent in 2009, the biggest decline since after the attack on Pearl Harbor, according to the median estimate of 51 economists surveyed Dec. 4 through Dec. 9. By the middle of next year, the economy will have shrunk for a record four consecutive quarters, the survey showed.

“That sounds scary enough to me,” said Jeffrey Frankel, an economics professor at Harvard University and a member of the group that determined the start of the recession. “Consumers have carried the weight of expanding demand for a long time at the expense of a serious deterioration of their balance sheets.”

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A drop in spending has brought the auto industry to the brink of collapse, and mounting unemployment, a lack of credit, and falling property and stock values will prompt Americans to turn even more frugal. President-elect Barack Obama has pledged to pursue the biggest public-works plan since the 1950s to stem the already year-old economic slump.

“It’s a serious recession, and there’s a good chance it will break the 16-month record since the Depression,” said James O’Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. “We’re at the stage where the weakness is feeding on itself. The next few months look pretty rough.”

Longest Slumps

The National Bureau of Economic Research last week announced the U.S. contraction began in December 2007. The longest economic slumps since 1945 were the 16-month downturns that ended in March 1975 and November 1982. The Great Depression lasted 43 months, from August 1929 to March 1933.

A report from the Commerce Department today showed wholesale inventories fell 1.1 percent in October, the most in seven years, as a record 4.1 percent drop in sales caused companies to scale back.

Full article here [1]


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URLs in this post:

[1] Bloomberg: http://www.bloomberg.com/apps/news?pid=20601068&sid=ado8P..GCtC4&refer=home

[2] Turmoil May Make Americans Savers, Worsening `Nasty’ Recession: http://www.prisonplanet.com/turmoil-may-make-americans-savers-worsening-nasty-recession.html

[3] U.S. Slump May Be Longest in Decades as Growth Fell Off `Cliff’: http://www.prisonplanet.com/us-slump-may-be-longest-in-decades-as-growth-fell-off-cliff.html

[4] Recession Worse Than Prior Estimates, Revisions Show: http://www.prisonplanet.com/recession-worse-than-prior-estimates-revisions-show.html

[5] More Evidence the Recession Has Started (Again): http://www.prisonplanet.com/more-evidence-the-recession-has-started-again.html

[6] Welcome To The Recession: Manufacturing Surveys Imply US Economy Has Entered The Second Month Of A (Re)Recession: http://www.prisonplanet.com/welcome-to-the-recession-manufacturing-surveys-imply-us-economy-has-entered-the-second-month-of-a-rerecession.html

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