(NEW YORK) The US economy has entered a recession that will be more painful and drawn out than the usual downturn, the director of the Reuters/University of Michigan consumer sentiment survey said yesterday.
Inflation pressures will linger despite the retrenchment in consumer spending, complicating the task of policy makers, the University’s Richard Curtin said in a report, citing data from industry group The Conference Board.
‘This is no ordinary recession,’ he said. ‘The after-effects will last much longer than the typical downturn.’
He said the Conference Board’s expectations index is a strong predictor of economic contractions, and that it is currently flashing red.
With Americans getting hit with everything from a housing downturn to excess borrowing, things will get worse before they get better.
‘Consumers must take more drastic steps to stabilise their finances in the midst of high fuel and food prices, stagnant incomes, and record debt,’ Mr Curtin said.
The new report adds that a rising wealth gap will, even more than usual, lead to disproportionate pain for middle and lower-income Americans.
‘Growing income inequality has insulated higher income groups to a greater extent than ever before,’ the report said.
Meanwhile, inventories of unsold goods at US wholesalers jumped a larger-than-expected 1.1 per cent in December, while wholesale sales of durable goods posted its biggest drop in more than six years, government data showed yesterday.
Source: Reuters (Business Times 9 Feb 08)