WASHINGTON - Higher U.S. energy prices, a deteriorating labor market and falling stock prices have raised the likelihood the world's richest economy will enter into recession this year or has already done so, according to forecasts of a closely watched panel of economists released on Thursday.
These growing strains on the economy, already hit hard by the worst housing downturn in decades, have led to a weaker outlook in the latter part of this year and next, according to the Blue Chip Economic Indicators survey.
"With oil now at $144 per barrel, energy prices will continue to siphon off an ever-larger share of consumer income in the near term," wrote Blue Chip economist Andrew Tilton, from Goldman Sachs in New York, in recent research.
Among the respondents, 54.5 percent said the economy will enter into a recession or has already done so, up from 46.5 percent a month earlier.
But the economists raised their forecast for growth during the second quarter to 1.2 percent from a scant 0.4 percent on stronger-than-expected spending during the quarter. But the outlook thereafter has weakened.
The government is set to release its estimate on gross domestic product growth for the April-through-June quarter at the end of this month, and Wall Street economists generally agree that spending was stronger largely because of rebate checks from the economic stimulus package that fell into consumers' hands.
Growth during the third quarter is expected to be 1.3 percent, down from 1.5 percent forecast by the Blue Chip economists a month ago. For the final quarter of this year, growth estimates were cut in half, with GDP expected to grow 0.6 percent.
"More than 75 percent of the $106 billion in rebate monies have now been disbursed and put to use faster than analysts had anticipated," the newsletter wrote.
But in the wake of that fiscally-induced spending increase, the economists polled said spending and growth are likely to fall back in the following quarters.
INFLATION A RISK
Even with a slowing economy, inflation risks will lead the Federal Reserve to raise interest rates, according to the Blue Chip survey.
Inflation, as measured by the consumer price index, is expected to advance by 4.2 percent this year, up from 3.9 percent forecast a month ago.
Excluding food and energy, the CPI is expected to grow by 2.5 percent this year and by 2.4 percent in 2009.
An overwhelming 86 percent of the panelists expect that the central bank's next move will be a rate increase. That falls in line with investor sentiments that a rate increase could come as soon as this fall.
These growing strains on the economy, already hit hard by the worst housing downturn in decades, have led to a weaker outlook in the latter part of this year and next, according to the Blue Chip Economic Indicators survey.
"With oil now at $144 per barrel, energy prices will continue to siphon off an ever-larger share of consumer income in the near term," wrote Blue Chip economist Andrew Tilton, from Goldman Sachs in New York, in recent research.
Among the respondents, 54.5 percent said the economy will enter into a recession or has already done so, up from 46.5 percent a month earlier.
But the economists raised their forecast for growth during the second quarter to 1.2 percent from a scant 0.4 percent on stronger-than-expected spending during the quarter. But the outlook thereafter has weakened.
The government is set to release its estimate on gross domestic product growth for the April-through-June quarter at the end of this month, and Wall Street economists generally agree that spending was stronger largely because of rebate checks from the economic stimulus package that fell into consumers' hands.
Growth during the third quarter is expected to be 1.3 percent, down from 1.5 percent forecast by the Blue Chip economists a month ago. For the final quarter of this year, growth estimates were cut in half, with GDP expected to grow 0.6 percent.
"More than 75 percent of the $106 billion in rebate monies have now been disbursed and put to use faster than analysts had anticipated," the newsletter wrote.
But in the wake of that fiscally-induced spending increase, the economists polled said spending and growth are likely to fall back in the following quarters.
INFLATION A RISK
Even with a slowing economy, inflation risks will lead the Federal Reserve to raise interest rates, according to the Blue Chip survey.
Inflation, as measured by the consumer price index, is expected to advance by 4.2 percent this year, up from 3.9 percent forecast a month ago.
Excluding food and energy, the CPI is expected to grow by 2.5 percent this year and by 2.4 percent in 2009.
An overwhelming 86 percent of the panelists expect that the central bank's next move will be a rate increase. That falls in line with investor sentiments that a rate increase could come as soon as this fall.
