Americans Expect Recession

Poll
Wednesday Dec 19 23:47 AEDT

A growing number of Americans expect a US recession in the next year as the housing slump and steep food and energy prices sour sentiment, a Reuters/Zogby poll released on Wednesday shows.

Of the likely voters surveyed, 43.4 per cent said they expect a recession, up from 40 per cent a month earlier. The worsening mood was apparent across nearly every age and ethnic group, and both sides of the political spectrum, pollster John Zogby said.

"The recession mentality has settled in. It's in the bloodstream now," he said. "It's an across-the-board funk."

Zogby said the economic mood on Main Street was worse now than in 2001, the most recent US recession, and was unlikely to improve quickly, even if the Federal Reserve continued lowering interest rates and the housing market stabilised.

The Fed has cut its benchmark interest rate three times since mid-September as it tries to insulate the broader economy from the housing slump and tightening credit conditions. It is expected to cut rates further in the coming months.

The housing market mess has been front-page news for the better part of the year, putting a chill on consumer sentiment and spending and threatening to derail US economic growth.

Nearly 31 per cent of those polled expected house prices to rise in their area over the next year, a slight improvement from last month, when that total stood at 27.5 per cent. Some two-thirds thought prices would stay about the same or fall.

Economists and investors widely expect an economic slowdown in the current quarter and into 2008 as the housing problems, tightening credit conditions and steep food and energy prices take their toll.

A Reuters poll of 88 analysts, taken from December 12 to 18, showed that they put the chances of a recession in the next 12 months at 40 per cent, up from 35 per cent in November's poll and 30 per cent in October.

The Reuters/Zogby poll had a margin of error of plus or minus 3.2 percentage points.
©AAP 2007