US in recession; GDP to shrink 2.6% in Q4: survey

The US has slipped into recession and is estimated to shrink 2.6 per cent in the fourth quarter, primarily stoked by worsening credit conditions, says a survey.

Moreover, the unemployment rate in the country is expected to reach 7.5 per cent by the end of 2009.

The survey of 50 professional forecasters was conducted by US-based professional group National Association for Business Economics between October 28 and November 7. According to 96 per cent of those surveyed, a recession has already begun.

About half the forecasters estimate that recession, two consecutive quarters of contraction, started in the fourth quarter of 2007 or in the first quarter of 2008.

"Following a small contraction in the third quarter of this year, the NABE forecasters expect real GDP to decline at a 2.6 per cent rate in the fourth quarter... With recession continuing into 2009, GDP growth next year is expected to be a meagre 0.7 per cent. This would be the slowest growth over a two-year period since the early 1980s," NABE President Chris Varvares said in a statement.

In the third quarter, the American economy shrunk 0.1 per cent and is widely anticipated to witness contraction in the coming months due to rising job losses, declining consumer spending and lack of credit availability, among others.

The survey showed that the jobless rate would touch 7.5 per cent by the end of next year. In October, the unemployment rate had reached a 14-year high of 6.5 per cent.

"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 and evidence of spillover to the real economy," Chris Varvares noted.