The US has entered a recession that will persist into next year, and economies around the world will follow suit, according to a survey of business economists.
After growing 1.4 percent this year, the US will contract 0.2 percent next year, according to the median estimate in a poll taken by the National Association for Business Economics (NABE). A majority of respondents said the UK, euro area, Japan, Canada and Mexico are either now, or will soon be, in a recession.
“Business economists became decidedly more negative on the economic outlook for the next several quarters as a result of the intensification of credit-market stresses,” Chris Varvares, NABE president, said in a statement.
Pessimism about the outlook for stocks, construction, home prices and employment means household wealth and spending will keep weakening, the report said. Of all the measures undertaken so far to stem the slump, the US Treasury’s bank-capital injections and Federal Reserve support for the commercial paper market will prove the most effective, the economists said.
The jobless rate, now at a 14-year high of 6.5 percent, will climb to 7.5 percent by the end of next year, according to the median forecast.
Last month, the group anticipated it would peak at 6.4 percent by the middle of next year.
Auto sales, which the group last month projected would stabilize next year, are now forecast to keep sliding. Purchases will decline 6.7 percent next year after dropping 17 percent this year, the survey results showed.
Similarly, the economists said housing starts won’t bottom until next year. Builders will break ground on 870,000 homes next year, the fewest in 50 years of record-keeping. Property values are likely to fall another 3.5 percent next year after dropping 6 percent this year, the group said.
The outlook for home sales was less dire, with almost all respondents projecting purchases would reach a low by next June.
On a quarterly basis, the business economists projected the US would shrink at a 2.6 percent annual pace from last month to next month and at a 1.3 percent rate in the first three months of next year. The world’s largest economy would resume growing in the second quarter of next year, expanding at a 0.5 percent pace.
Fed policy makers are likely to hold the benchmark interest rate at 1 percent through the third quarter of next year, even as the outlook for growth dims and inflation is projected to cool, the survey showed.
Economists surveyed by Bloomberg News from Nov. 3 to Nov. 11 were more pessimistic about the US economy than the NABE group. The economy will probably contract 0.3 percent next year, prompting central bankers to lower the key rate to a record-low 0.5 percent by March, the Bloomberg survey showed.
The NABE poll was conducted from Oct. 28 to Nov. 7.
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