The US economy is passing through the worst part of the recession, but growth may return by the second half of next year, according to economists in the latest Wall Street Journal survey.
"The intensity of decline will wane," Stephen Stanley of RBS Greenwich Capital was quoted as saying. "We've cut out a lot of the low-hanging fruit, and it gets progressively tougher to see such rapid rates of decline."
Economists, the paper said, were supportive of more government stimulus. More than 80 per cent favour a stimulus package in January, even if one is passed before the end of 2008. Some 34 per cent of respondents said top priority in such a package should be permanent tax cuts.
Economists, the Journal said, saw other factors boosting the chances of recovery.
"Stimulus will help, but it won't get us out of the problem. It's tantamount to taking aspirin, as t will only temporarily ease pain," California State University's Sung Won Sohn told the paper, saying rebuilding confidence as essential for recovery.
President-elect Barack Obama "needs to extend unemployment, work to stem foreclosures and use other plans to demonstrate that he's doing something. To stabilise confidence, you need programs to ease pain. People see that they can count on you, and confidence recovers," he said.
In October, the Journal noted, the Conference Board's measure of consumer confidence posted the lowest reading since the survey began in 1967. Consumer spending also has suffered, recording a 0.3 per cent decline in September.
Mounting job losses have exacerbated the consumer downturn, and even though economists are forecasting some improvement by late next year, the picture for the labour market remains grim, the paper said.
On average, respondents expect the unemployment rate to rise to 7.7 per cent by December 2009, up from 6.5 per cent last month, while they see the economy shedding more than 100,000 jobs a month over the next year.
If the economists' average forecast were to materialise, the paper said, the depth of the downturn would be about on a par with the 1990 recession, but it wouldn't reach the low levels seen in the early 1980s or 1970s.
"We're at the very beginning of this process of unwinding a credit bubble and an asset-price bubble that took place over decades. It got out of control in the last five years, but it didn't appear in the last five years," said Joshua Shapiro of MFR Inc, who also is forecasting a shrinking economy through all of 2009.
"People think in terms of a calendar as opposed to economic fundamentals. The cycle doesn't know from the calendar."