The world's largest economy will grow at a 0.5 percent annual rate from January through March, capping the weakest six months since the last economic slump in 2001, according to the median estimate of 62 economists polled from Jan. 30 to Feb. 7.
Federal Reserve Chairman Ben S. Bernanke will lower the benchmark interest rate a further half point by June, adding to the fastest easing since at least 1990, the survey showed. The odds of a recession over the next 12 months, pegged at 40 percent in the January survey, jumped to 50 percent as payrolls, auto sales and stocks slumped.
The anticipated rate of expansion for all of 2008 was reduced to 1.7 percent, the lowest in six years. Economists also slashed the projected growth rate for the second quarter to 1 percent from the 1.8 percent forecast last month.
Treasury securities rose, with yields on benchmark 10-year notes falling to 3.69 percent at 7:40 a.m. in New York from 3.76 percent late yesterday. Yields dropped more than 1 percentage point in the past six months as the economy deteriorated.
Consumer spending, which accounts for more than two-thirds of the economy, will grow at a 1 percent annual rate from January through March, half the previous quarter's gain and the smallest since 2001. The last time spending dropped was in 1991.
The economy lost 17,000 jobs in January, the first drop in more than four years. The unemployment rate will gradually rise to 5.2 percent by the second quarter of 2008, according to the survey median, from last month's 4.9 percent.
Big-ticket items aren't the only ones taking a hit. Retail sales at stores open at least a year rose 0.5 percent last month, the worst January since 1970, the International Council of Shopping Centers said yesterday. Discounts failed to avert declines at chains from Target Corp. to Nordstrom Inc.
In a sign the slowdown is spreading beyond housing, service industries unexpectedly contracted in January at the fastest pace since the 2001 recession, a report from the Institute for Supply Management showed on Feb. 5. U.S. stocks tumbled the most in 11 months that day. The Standard & Poor's 500 Index is down for three consecutive months, the longest losing streak since 2003.