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The U.S. economy has sunk into a recession and government action is critical to stem the damage, according to economists in the latest Wall Street Journal forecasting survey. Those cracks are quickly adding up. On average, the 52 economists surveyed now expect U.S. gross domestic product to contract in the third and fourth quarters of this year, as well as the first quarter of 2009. This is the first time that survey forecasts for those periods have turned negative. If those predictions bear out, it would mark the first time U.S. GDP — the total value of goods and services produced — has contracted for three consecutive quarters in more than a half century. Economists put the odds of recession in the next 12 months at 89%, up from 60% in last month’s survey. More

ENN
Over the past eighteen months, oil prices have more than doubled, inflicting huge costs on the global economy. Strong global demand, owing to emerging economies like China, has undoubtedly fueled some of the price increase. But the scale of the price spike exceeds normal demand and supply factors, pointing to the role of speculation—and underscoring the need for policy action to clean up the oil market. Reflecting their faith in markets, most economists dismiss the idea that speculation is responsible for the price rise. If speculation were really the cause, they argue, there should be an increase in oil inventories, because higher prices would reduce consumption, forcing speculators to accumulate oil. The fact that inventories have not risen supposedly exonerates oil speculators.

But the picture is far more complicated, because oil demand is extremely price insensitive. In the short run, it is technically difficult to adjust consumption. For instance, the fuel efficiency of every automobile and truck is fixed, and most travel is nondiscretionary. Though higher airline ticket prices may reduce purchases, airlines reduce oil consumption only when they cancel flights. This illustrates a fundamental point: In the short run, reduced economic activity is the principle way of lowering oil demand. Thus, absent a recession, demand has remained largely unchanged over the past year. More

We already knew this.

(UPI) The U.S. economy has reached the point of being in recession, leading economists indicated Tuesday. Of 52 economists surveyed in a quarterly poll, USA Today reported, two-thirds of them indicated the U.S. economy is in a recession. The figure jumps to 79 percent when economists who believe the economy will shrink in 2008 are added in.
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