This is not a fun time to be forecasting the economic outlook for 2009.
Not only are the prospects dim, but uncertainty is at an all-time high. One thing is certainly clear: the U.S. economy slowed in 2008. Economic activity in the third quarter declined 0.3 percent, the worst performance since a 1.4 percent decline in the third quarter of 2001 (thanks to the Sept. 11 terrorist attacks).
Add the turmoil in the financial markets and the current freeze in credit to this weak economic scenario and the outlook is clearly grim.
In fact, economists generally expect economic activity to slow even further into early 2009. For 2008 as a whole, economic growth is likely to average just 1.6 percent, followed by a very sluggish 1.0 percent expansion in 2009.
But the economy will turn more positive in the latter half of 2009. The Congress and the Federal Reserve have initiated a number of stimulus measures that, while taking time, will begin to be felt by the middle of 2009.
The Federal Reserve has lowered interest rates to just 1.0 percent (like they did following Sept. 11), which should stimulate economic activity once the credit markets thaw. That thaw should occur in early 2009 thanks to the Congress’ and the Fed’s efforts to shore up bank liquidity and build confidence in the banking system.
So, by the second half of 2009, GDP growth could reach 2 to 3 percent — almost back to the economy’s long-term growth potential. Although it will be a long, hard ride in getting there, the path should be much smoother by this time next year.
Not only are the prospects dim, but uncertainty is at an all-time high. One thing is certainly clear: the U.S. economy slowed in 2008. Economic activity in the third quarter declined 0.3 percent, the worst performance since a 1.4 percent decline in the third quarter of 2001 (thanks to the Sept. 11 terrorist attacks).
Add the turmoil in the financial markets and the current freeze in credit to this weak economic scenario and the outlook is clearly grim.
In fact, economists generally expect economic activity to slow even further into early 2009. For 2008 as a whole, economic growth is likely to average just 1.6 percent, followed by a very sluggish 1.0 percent expansion in 2009.
But the economy will turn more positive in the latter half of 2009. The Congress and the Federal Reserve have initiated a number of stimulus measures that, while taking time, will begin to be felt by the middle of 2009.
The Federal Reserve has lowered interest rates to just 1.0 percent (like they did following Sept. 11), which should stimulate economic activity once the credit markets thaw. That thaw should occur in early 2009 thanks to the Congress’ and the Fed’s efforts to shore up bank liquidity and build confidence in the banking system.
So, by the second half of 2009, GDP growth could reach 2 to 3 percent — almost back to the economy’s long-term growth potential. Although it will be a long, hard ride in getting there, the path should be much smoother by this time next year.
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