Economists cut their estimates for the expansion this quarter from November's 1.5 percent forecast, according to the median of 63 estimates in a Bloomberg News survey taken Dec. 3 to Dec. 10. Gross domestic product in the first three months of next year will also be less than previously projected.
Spending, which accounts for more than two-thirds of the economy, will grow in 2008 at the slowest pace in 17 years as higher fuel costs and falling home values limit consumers' buying power. The Federal Reserve will probably lower interest rates today and again early next year to fend off recession, the survey said.
``Everything is going against the consumer,'' said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, who lowered his growth forecast to 0.5 percent for this quarter. ``Confidence is off quite a bit, and gasoline is going to take a toll. We're very, very close to a recession.''
http://www.bloomberg.com/apps/news?pid=20601087&sid=axc2icqL....
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Here is one blogger's take:
http://suddendebt.blogspot.com/2007/12/hand-to-mouth-factor.....
The mechanism that kept consumer spending high and rising over the years, was quite simple: less saving and more borrowing. Starting in the mid-1980's the saving rate (the portion of disposable income not spent) moved lower, eventually reaching zero, and household debt rose sharply from 65% to 135% of disposable income. Not to mince words, Americans live hand-to-mouth and are in debt up to their eyeballs. Under these circumstances, it is little wonder that consumer spending is kept aloft. But what's lurking down below?
