Survey: Most economists see recession end in ‘09

Survey: Most economists see recession end in ‘09WASHINGTON (AP) – May 27, 2009 – More than 90 percent of economists predict the recession will end this year, although the recovery is likely to be bumpy.That assessment came from leading forecasters in a survey by the National Association for Business Economics released Wednesday. It is generally in line with the outlook from Federal Reserve Chairman Ben Bernanke and his colleagues.About 74 percent of the forecasters expect the recession – which started in December 2007 and is the longest since World War II – to end in the third quarter. Another 19 percent predict the turning point will come in the final three months of this year, and the remaining 7 percent believe the recession will end in the first quarter of 2010.“While the overall tone remains soft, there are emerging signs that the economy is stabilizing,” said NABE president Chris Varvares, head of Macroeconomic Advisers. “The economic recovery is likely to be considerably more moderate than those typically experienced following steep declines.”One of the major forces that plunged the economy into a recession was the financial crisis that struck with force last fall and was the worst since the 1930s. Economists say recoveries after financial crises tend to be slower.Against that backdrop, unemployment will climb this year even if the economy is rebounding, the NABE forecasters predict. Companies won’t be in a rush to hire until they feel certain any recovery is firmly rooted.For all of this year, the forecasters said the unemployment rate should average 9.1 percent, a big jump from 5.8 percent last year and up from its current quarter-century peak of 8.9 percent. If NABE forecasters are right, it would be the highest since a 9.6 percent rate in 1983, when the country was struggling to recover from a severe recession.Some forecasters thought the unemployment rate could rise as high as 10.7 percent in the second quarter of next year. The NABE outlook from 45 economists was conducted April 27 through May 11.General Motors Corp., chemical company DuPont and Clear Channel Communications Inc. were among the companies announcing mass layoffs during the survey period.With joblessness rising, consumers – major shapers of overall economic activity – likely will stay cautious, making for a tepid turnaround. And given the big bite the recession has taken out of household wealth, notably the values of homes and investment portfolios, consumers probably will stay subdued for some time.Seventy-one percent of the forecasters believe a more-thrifty consumer will be around for at least the next five years. Americans’ personal savings rate edged up to 4.2 percent in March, marking the first time in a decade that the savings rate has been above 4 percent for three straight months.Even as the NABE forecasters believe the country will emerge from recession later this year, they also predict the economy’s overall performance in 2009 will be rotten.The economy should contract by 2.8 percent this year, the forecasters said in updated projections. That’s worse than the 1.9 percent drop they forecast in late February. If they are right, it would mark the worst annual contraction since 1946, when economic activity fell by 11 percent.Still, the forecasters believe the worst is already behind the country in terms of lost economic activity.The economy shrank at a 6.1 percent annualized pace in the first three months of this year, on top of a 6.3 percent decline in the final three months of last year, the worst six-month performance in 50 years.For the current April-June quarter, the NABE forecasters believe the economy will shrink at a pace of 1.8 percent. After that, the economy should start growing again – at a 0.7 percent pace in the third quarter and a 1.8 percent pace in the fourth quarter.NABE’s growth projections for the third and fourth quarters are lower than those made in late February. The downgrade was based on the expectation that businesses, whose profits and sales were hit hard by the recession, will remain wary of ramping up investment.President Barack Obama’s $787 billion stimulus package of increased government spending and tax cuts, near-zero interest rates ordered by the Fed and government programs to get banks to lend more freely again all factor into the expected economic revival.Many forecasters also predict that home sales will hit bottom by the middle of this year, another stabilizing factor for the economy.In an encouraging sign, sales of previously owned home rose 2.9 percent in April as buyers snapped up bargains, the National Association of Realtors reported Wednesday. The median sales price sank to $170,200, a 15.4 percent drop from a year ago. Data on new-home sales is due Thursday.Next year, the economy should grow by 2 percent, the forecasters said. That was lower than the 2.4 percent growth projected in February.With a lethargic recovery expected, forecasters predict the Fed won’t start boosting interest rates until the second quarter of next year.Because Fed policymakers expect credit and financial problems to ebb slowly, “the pace of the recovery would continue to be damped in 2010,” they said last week.Copyright 2009 The Associated Press, Jeannine Aversa, AP Economics Writer.

Florida’s consumer confidence down one point

Florida’s consumer confidence down one pointGAINESVILLE, Fla. – May 27, 2009 – Florida’s consumer confidence dropped one point in May to 71, reflecting pessimism about personal finances despite an improved national economic outlook, the latest University of Florida (UF) survey finds.The index component measuring perceptions of personal finances now compared with a year ago fell four points to 40, one point above its all-time low record of 39 in December. In contrast, expectations of personal finances a year from now rose five points to 90, the highest level since October 2007.“The makeup of the consumer confidence index in May reflects optimism … but the decline in perceptions of current personal finances … is noteworthy,” says Chris McCarty, director of UF’s Survey Research Center at the Bureau of Economic and Business Research. “Floridians are saying they don’t have the money now to buy, but they expect to within a year.”Of the remaining index components, perceptions of the U.S. economy over the next year rose four points to 73, while perceptions of U.S. economic conditions over the next five years fell four points to 78. Perceptions of whether it is a good time to buy big-ticket consumer items fell six points to 72.The economic environment for consumers is mixed. On the plus side, housing prices in Florida appear to be stabilizing in some markets, although foreclosures are still high, McCarty says. In many areas, housing prices have fallen to a level that could not sustain a much larger drop.In other positive news, the unemployment rate fell two-tenths of a percent in April to 9.6 percent, McCarty says. Rising unemployment has been a big concern for policymakers in anticipating a recovery. However, the stock market continues to show volatility, although it appears to have a sustained rally.Also of concern is that retail sales have been down for the past two months, reflecting pessimism about the economy, even though April’s decline was small, McCarty said. Also, gasoline prices have risen 25 cents in the past two weeks, as is typically the case when summer travel approaches, he said.“Moving forward, we still anticipate at least a short-term decline in confidence over the next couple of months as the impact of the state budget is felt and the effects of a GM (General Motors) bankruptcy move through the system,” McCarty says.However, on balance, the economic news, while not necessarily good, is not shockingly bad, either, he adds. “Like the end of hurricane season, Floridians are grateful for a day, week or month without facing economic destruction. At this point, they just want to get about the business of cleaning up the mess.”The overall index for April was revised from a preliminary figure of 71, which was reported earlier, to 72 after all the survey data had been collected at the end of the month.The research center conducts the Florida Consumer Attitude Survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for May was conducted from 408 responses. The index is benchmarked to 1966, so a value of 100 represents the same level of confidence for that year.© 2009 FLORIDA ASSOCIATION OF REALTORS®