By Timothy R. Homan
Jan. 30 (Bloomberg) -- The U.S. economy probably nosedived in the final months of last year, a trajectory that’s likely to continue in early 2009 as soaring unemployment wallops consumer spending, economists said before a government report today.
Gross domestic product contracted at a 5.5 percent annual pace from October through December, according to the median estimate of 79 economists surveyed by Bloomberg News. It would be the biggest drop since 1982 and follow a 0.5 percent decline the previous three months.
The economy is likely to contract further in the first three months of this year as retailers and manufacturers, from Starbucks Corp. to Boeing Co., this week announced plans to slash payrolls and cut production. Today’s report will put pressure on President Barack Obama to win quick congressional approval of a fiscal stimulus package.
“It’s one of the deepest recessions in two generations,” said Roger Kubarych, chief U.S. economist for UniCredit Global Research in New York. “It’s still getting worse.”
The Commerce Department’s GDP report is due at 8:30 a.m. in Washington. Estimates of economists surveyed by Bloomberg News ranged from declines of 3 percent to 7 percent. The report is the first for the quarter and will be revised in February and March as more information becomes available.
The Federal Reserve this week said it’s prepared to purchase Treasury securities to shore up lending and warned inflation may recede too rapidly. It voted to leave the benchmark interest rate as low as zero.
‘Significant’ Risk
Fed officials also said there was a “significant” risk the economy wouldn’t start recovering until 2010.
A lack of credit, record foreclosures and mounting job losses have forced households to retrench. Consumer spending, the largest part of the economy, is forecast to have dropped at a 3.5 percent pace last quarter after slumping at a 3.8 percent rate the previous three months. It would be the first time purchases declined more than 3 percent in consecutive quarters since records began in 1947.
Americans may pull back further as employers slash payrolls. Companies cut 524,000 workers in December, bringing total job cuts for last year to almost 2.6 million.
More cutbacks are on the way. Boeing, Starbucks, Home Depot Inc. and Texas Instruments Inc. are among U.S. companies that announced thousands of layoffs this week.
Retailers are among businesses eliminating workers following the worst holiday shopping season since the International Council of Shopping Centers started tracking data in 1969.
Cutbacks Spread
The economic slump is likely to persist as companies join consumers in cutting back. Orders for durable goods - items meant to last at least three years - declined each month from October through December, signaling businesses plan to cut spending on new equipment.
Residential construction has also taken a turn for the worse as credit dried up. Home starts and building permits both dropped to record lows in December, according to Commerce figures, indicating housing will remain a drag on growth in 2009 and extend the four-year-old housing recession.
Caterpillar Inc., the world’s largest maker of bulldozers and excavators, this week said it’s cutting 20,000 jobs, and profit and sales this year will trail analysts’ estimates.
“We are expecting recessionary conditions to persist in most of the world throughout the year, with no growth in the world economy,” Chief Executive Officer Jim Owens said Jan. 26 on a conference call with analysts. “Quite frankly, the best hope, I think, is a stimulus package in the U.S. and China, driving demand for commodities.”
The slowdown in global demand indicates American exports are unlikely to contribute to growth in early 2009. The world economy will expand 0.5 percent this year, the weakest gain in the postwar era, the International Monetary Fund said Jan. 28.
Bloomberg Survey
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GDP Personal GDP Core PCE
Annual Consump. Prices Prices
QOQ% QOQ% QOQ% QOQ%
===============================================================
Date of Release 01/30 01/30 01/30 01/30
Observation Period 4Q A 4Q A 4Q A 4Q A
---------------------------------------------------------------
Median -5.5% -3.5% 0.4% 1.0%
Average -5.4% -3.4% 0.6% 1.2%
High Forecast -3.0% -2.3% 3.6% 2.1%
Low Forecast -7.0% -4.0% -2.5% 0.1%
Number of Participants 79 12 36 11
Previous -0.5% -3.8% 3.9% 2.4%
---------------------------------------------------------------
4CAST Ltd. -5.6% --- 3.1% ---
Action Economics -6.5% --- 2.1% ---
AIG Investments -6.1% --- --- ---
Aletti Gestielle SGR -4.5% -2.3% -1.8% 0.6%
Ameriprise Financial Inc -4.8% -3.1% 0.4% 2.0%
Argus Research Corp. -4.3% --- -2.3% ---
Banc of America Securitie -5.2% --- 0.2% ---
Bancolombia SA -5.0% --- --- ---
Bank of Tokyo- Mitsubishi -6.1% --- --- ---
Bantleon Bank AG -5.0% --- --- ---
Barclays Capital -5.5% --- 0.8% 0.5%
BMO Capital Markets -5.5% --- -0.3% ---
BNP Paribas -6.0% --- 1.8% ---
Briefing.com -5.5% --- 0.5% ---
Calyon -5.7% -3.5% --- ---
Castlestone Management LT -6.2% --- --- ---
CIBC World Markets -4.8% --- 0.7% ---
Citi -6.0% --- 2.8% ---
ClearView Economics -4.9% -3.0% --- ---
Commerzbank AG -6.4% --- --- ---
Credit Suisse -4.7% --- -1.6% ---
Daiwa Securities America -5.5% --- 3.0% ---
DekaBank -5.5% --- --- ---
Desjardins Group -4.8% --- --- ---
Deutsche Bank Securities -6.5% --- -0.5% ---
Deutsche Postbank AG -4.8% --- --- ---
Dresdner Kleinwort -5.8% --- 1.2% ---
DZ Bank -4.0% --- 0.4% ---
First Trust Advisors -5.2% --- 0.2% ---
Fortis -5.5% --- --- ---
FTN Financial -4.5% --- --- ---
Goldman, Sachs & Co. -5.9% --- 1.2% 0.7%
Helaba -4.5% --- --- ---
Herrmann Forecasting -5.8% -3.5% --- ---
High Frequency Economics -6.0% --- -1.0% 1.5%
Horizon Investments -6.1% --- --- 1.0%
HSBC Markets -5.6% --- -0.1% ---
IDEAglobal -4.5% -3.5% 3.6% 2.0%
IHS Global Insight -5.8% --- --- ---
Informa Global Markets -6.0% --- --- ---
ING Financial Markets -6.1% --- --- ---
Insight Economics -3.5% --- 1.0% ---
Intesa-SanPaulo -5.2% --- --- ---
J.P. Morgan Chase -5.5% --- 2.0% ---
Janney Montgomery Scott L -5.1% -3.3% --- 1.0%
Landesbank Berlin -5.8% --- --- ---
Landesbank BW -3.5% --- --- ---
Maria Fiorini Ramirez Inc -5.0% --- --- ---
Merrill Lynch -6.0% --- 1.6% ---
MFC Global Investment Man -5.8% -4.0% 0.4% 1.3%
Moody’s Economy.com -5.0% --- --- ---
Morgan Keegan & Co. -6.6% --- 0.3% ---
Morgan Stanley & Co. -6.6% --- --- ---
National Bank Financial -5.4% -3.5% --- ---
National City Bank -5.4% -3.1% 0.3% ---
Natixis -5.6% -3.5% 0.3% ---
Newedge -4.5% --- --- ---
Nomura Securities Intl. -4.9% --- 0.6% ---
Nord/LB -3.0% --- -1.0% ---
PNC Bank -5.5% --- -1.0% ---
Raymond James -5.9% --- --- ---
RBC Capital Markets -6.1% --- --- ---
RBS Greenwich Capital -4.0% --- 3.6% ---
Ried, Thunberg & Co. -5.0% --- --- ---
Schneider Foreign Exchang -6.1% --- --- ---
Scotia Capital -4.5% --- --- ---
Societe Generale -7.0% --- --- 0.1%
Standard Chartered -7.0% -4.0% --- ---
Stone & McCarthy Research -4.5% --- -2.0% ---
TD Securities -5.6% --- --- ---
Thomson Financial/IFR -4.0% --- --- 2.1%
UBS Securities LLC -4.5% --- -2.5% ---
Unicredit MIB -5.0% --- --- ---
University of Maryland -5.0% --- 2.6% ---
Wachovia Corp. -5.3% --- --- ---
Wells Fargo & Co. -6.0% --- --- ---
WestLB AG -5.6% --- --- ---
Westpac Banking Co. -6.5% --- --- ---
Wrightson Associates -5.0% --- --- ---
===============================================================
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
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