Economists see recession through 2009

Survey finds that falling consumer demand, rising unemployment and ongoing credit crunch will fuel downturn through end of next year.

NEW YORK (CNNMoney.com) -- A survey of top economists released Monday shows that the vast majority of them believe the economy has fallen into a recession that will continue throughout all of 2009.

According to the National Association of Business Economists, 90% of the 102 members responding were more pessimistic about the economy than they had been in July.

The economists indicated that a recession is likely to continue at least through the end of next year, with 79% saying the economy will grow less than 1% and 38% saying the economy will shrink next year.

"There has been a sharp decline in current and near-term expectations among economists," said Ken Simonson, a member of the NABE committee that conducted the survey. "This represents a big turnabout in attitude about the economy."

With the economy mired in a prolonged credit crisis, the Federal Reserve has slashed interest rates several times, most recently cutting them by a half-percentage point, to 1%, on October 29.

But just 36% of respondents said the rate cuts and other initiatives by the Fed to unfreeze the credit markets were having a positive impact and 58% said the programs were having little impact. The survey was completed on Oct. 23, before the Fed's last rate cut.

"Economists have a very pessimistic view of the Fed's programs," said Simonson. "The inability to get funding has lowered their near-term expectations for the economy."

Low consumer sentiment and poor economic conditions have sharply reduced demand for goods and services. According to the survey, 35% reported falling demand while just 30% said demand was rising. It was the first time since 2001 in which more respondents reported declining demand than rising demand.

By way of comparison, 44% of respondents reported rising demand in July and only 19% reported falling demand. The NABE said every time since 1982 when economists reported more declines than increases in demand, the economy has later proven to be in a recession.


Continued job cuts are also likely, as 23% of respondents said their firms or industries were cutting jobs, compared to 16% who reported that they were hiring.

"Over the next six months, far more firms expect to cut back on employment, which will likely make the recession deeper," Simonson said. To top of page