Drop in retail sales backs economists’ view on US recession

March 14th, 2008 - 12:38 pm ICT by admin  

By Parveen Chopra
New York, March 14 (IANS) The view of a majority of economists in the latest Wall Street Journal survey confirming the slide of the US into recession is supported by new data showing a sharp drop in retail sales last month. While President George W. Bush would go only as far as acknowledging that there was an economic slowdown, over 70 percent of the 55 economists in the Journal’s periodic economic forecasting survey said the country was already in recession, the business daily reported Thursday.

The Commerce Department reported Thursday that retail sales dipped by 0.6 percent in February and drop in sales, excluding volatile auto and parts, was 0.2 percent. The decline means a sharp slowdown in consumer spending - a major driver of economic growth in the country.

Spending has taken a hit as Americans grapple with high petrol prices and the credit crunch as well as falling home values.

Much of the economists’ gloom in the survey stemmed from last Friday’s employment report, which showed a loss of 63,000 jobs in February, a decline for the second consecutive month.

“My recession call comes from the employment data. It struck me as a recessionary number,” Stephen Stanley of RBS Greenwich Capital told the Journal.

The latest survey conducted March 7-11 showed a shift in economists’ views from one carried out five weeks ago. Experts now believe the economy will only add some 9,000 jobs every month over the next one year, a steep fall from the 48,500 projected in a previous survey.

Twenty-nine of the 55 respondents said they expect the economy to contract in the current quarter and 25 expect it to do so in the second. The average of all the forecasts is for meagre growth - just 0.1 percent at an annual rate in the current quarter and 0.4 percent in the second.

Although the classic definition of recession is two consecutive quarters of declines in the GDP, the National Bureau of Economic Research, the official arbiter of when recessions begin and end, doesn’t necessarily follow that definition.

“If you go back to the 2001 recession, there was only one negative GDP quarter, and there might not even be one negative quarter in this recession,” Stanley said.

The economists also expressed growing concern that a 2008 recession could be worse than both the 2001 and 1990-91 downturns. They put the odds of a deeper downturn at an average 48 percent, up from 39 percent in the previous survey.

Most forecasters, however, expect a recovery to begin in the second half of this year, as the government’s stimulus package and the Fed’s interest-rate cuts begin to spur the economy, the Journal said.

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