Recession talk gains ground
The dreaded "r" word has returned to the nation's vocabulary, although few experts predict a recession will occur next year despite growing signs that the U.S. economy is slowing.
The longest economic expansion in U.S. history had made talk of recession moot until last weekend, when Republican vice presidential candidate Dick Cheney said in a televised interview that "we may well be on the front edge of a recession here." He touted George W. Bush's widespread tax cuts as a remedy.
Cheney's comments came on the heels of dire predictions from several economists, including Irwin Kellner of CBS MarketWatch, who said there was a 50 percent chance of a recession next year.
There is little question that the economy has slowed from the heady days of last year. The gross domestic product, the sum of all goods and services produced, grew at a 2.4 percent annual rate in the third quarter, less than half the 5.6 percent pace earlier this year. Consumer confidence fell last month to its lowest level in more than a year, due in part to roiling stock markets and the collapse of technology shares. And shoppers aren't opening their wallets as often, leading retailers to worry about the crucial holiday buying season.
The National Retail Federation said Monday that mall traffic was anemic during the first full week of the Christmas selling period and department stores saw a decline. "While no one can be certain, these figures suggest consumers may be distracted by the fluctuating stock market and the lingering presidential election challenge," said Jeff Konz of RCT Systems Inc., a Chicago survey company.
The season's slow start is evidence of a sluggish economy but not recession.
"Recession isn't an odds-on favorite," said David M. Blitzer, chief economist at Standard & Poor's in New York City. "There's a one-in-three chance of recession next year ... I think we're more likely to see GDP growth of 3 percent, which isn't bad for an expansion that's 10 years old."
A recession is defined as two consecutive quarters of a shrinking economy, which last occurred in 1991.
"In my view it is still far too early to be worrying about a recession," said Takanobu Igarashi, chief economist at Sanwa Bank in New York City.