The Slide Continues

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Bloomberg.com: Worldwide: "The U.S. economy is likely to keep deteriorating in early 2009 after shrinking last quarter by the most since 1982, as consumers and businesses retrench.

The 3.8 percent annual pace of contraction in the fourth quarter was less than forecast, with a buildup of unsold goods cushioning the blow. Excluding inventories, the decline was 5.1 percent, the Commerce Department said yesterday in Washington.

Job cuts announced this month by companies from Starbucks Corp. and Pep Boys - Manny, Moe & Jack to Eastman Kodak Co. mean there’ll be little respite in the first half of this year, economists said. The Obama administration used the figures to reinforce its call for Congress to pass a stimulus package in excess of $800 billion to arrest the economy’s decline.

“The recession is going to last through most of 2009, and we’ll be lucky to have growth back at zero by the end of the year,” Kenneth Rogoff, a Harvard University economics professor, said in a Bloomberg Television interview from Davos, Switzerland, yesterday. Economic growth “will be pretty tepid for a long time.”"

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Fed Warns of Global Deflation

Image via Wikipedia southfloridabusinesswatch.blogspot.com]

“The Fed statement yesterday said its prediction of a “gradual recovery” in the U.S. economy later this year has “significant” risks of failing to materialize. At their meeting, central bank officials gave updated forecasts for gross domestic product, inflation and unemployment that will be released with meeting minutes on Feb. 18.

It sounds like the worry is not so much recession as it is depression,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “We can only hope that the famous long and variable lags of monetary policy will eventually kick in.”

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