Recession by year's end -- worse for us

According to one economic futurist -- who reports to us on the findings of a number of forecasting panels -- we'll officially be in the recession before year's end but for most of the country the effects probably won't be as severe as those we've seen in the housing industry. Muted is the word he uses.

Jeff Thredgold serves on three national economic forecasting panels, each with roughly 50 members. One of these is the National Association for Business Economics, which released its most recent quarterly consensus forecast on February 25. Mr. Thredgold summarizes some of the findings in his most recent Tea Leaf:

The survey suggests that real (inflation adjusted) GDP, which grew at just a 0.6% annualized rate in the fourth quarter of 2007, will grow at a scant 0.4% rate in the first quarter of 2008, with 1.0% growth expected in the second quarter

Fiscal and monetary stimulus is expected to boost growth in the second half to a 2.8% real annual rate, bringing growth for the year to 1.8%. Real growth in 2007 was 2.2%

Some 45% of the panel believes that a recession will have occurred by the end of this year, although a majority of those believe the downturn will be relatively muted

The 2009 outlook calls for real GDP to grow 2.9%

The panel looks for the unemployment rate to average 5.2% in 2008 and 2009

The budget deficit, boosted by both slower growth and the cost of the fiscal stimulus package, is expected to rise from $162 billion in fiscal year 2007 to $375 billion in fiscal year 2008

The panel expects the Consumer Price Index to rise 3.0% in 2008, down from the 4.1% rate of 2007

The group expects the Federal Reserve to cut its target federal funds rate (currently 3.00%) to 2.50% by the end of 2008, and gradually bring it back to 3.50% by the end of 2009

Thredgold is a great speaker and generally appears at industry functions. He'll be a keynote speaker at the upcoming TAVMA annual convention in April.


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