Economy to worsen, recover slowly, survey shows

IBJ Staff

The health of the U.S. economy will worsen and its recovery will be slower than previously expected, according to 42 economists surveyed by Bloomberg News.

"We're now more pessimistic about the pace of recovery into 2009,' Richard Berner, co-head of global economics at Morgan Stanley in New York told Bloomberg. "We now see the Fed pursuing a slightly more accommodative path for monetary policy than just a week ago."

Still, the economists placed the chances of recession in the next 12 months at 50 percent, the same odds they gave last month.

Others put the chance of a recession a bit higher.

"The debate is shifting from whether it is a downturn to how long and how deep it will be,' said Kurt Karl, chief U.S. economist at Swiss Re in New York. "We have a 55 percent probability of recession. Now it looks like it's starting in the current quarter.'

Economists predict consumers will spend little or none of the federal tax rebate because of escalating gas prices, a continued decline in the housing market and shrinking payrolls. Congress and President Bush hope the rebate will spark spending and help lift the economy.

The economists expect the U.S. economy to grow at an annual rate of 0.3 percent in the first six months of the year, a half point less than estimated in February.