Another economic watch group declares a recession

By Tom Stundza -- Purchasing, 3/19/2008 11:00:00 AM

A collapse of the subprime housing market led to a credit crisis that has shaken the financial system to its core. Consumer confidence has tanked, gas prices are high, foreclosures are up, home values are down and, now, a key gauge of the U.S. manufacturing sector has tumbled.

Although the official word won't come for a while from the semi-official recession judges at the National Bureau of Economic Research, the economic data now available shows that the recession probably began in December. Four of the five indicators watched most carefully for signs of a break in economic growth are now trending lower. And the key industrial production report from the Federal Reserve, tumbled by 0.5% in February.

In fact, the industrial output fell by the biggest amount in four months, prompting Daniel Meckstroth, chief economist of the Manufacturers Alliance/MAPI trade group, to say “the industrial sector remains in recession.” The 0.5% slide was a far weaker reading than the slight increase of 0.1% that many analysts had been expecting, further underscoring the severity of the current economic slowdown.

In his report, Meckstroth says the manufacturing sector began a recession in October 2007 and the general economy fell into recession in December 2007. “The economic shock of a housing collapse; credit crunch, including financial sector turmoil; and sky-high oil prices has squeezed consumers budgets to the point where there is no growth left,” he suggests.

Just this week, a majority of U.S. adults polled say they believe the U.S. economy is in a recession, a CNN/Opinion Corp. poll released Monday found. The research group said nearly three-quarters (74%) of 1,019 adults polled said the county is in a recession, a jump from the 66% who said so a month ago.

President Bush, meanwhile, continues to talk about the possibility of more government action to help hurting consumers and a shaken financial market. For now, he is championing the upcoming tax rebates for millions of people and tax breaks for businesses. And he has embraced action by the Federal Reserve, which this week again slashed interest rates after helping finance the $30 billion buyout of collapsing financial giant Bear Stearns by J.P. Morgan Chase & Co. Bush says the American people should have confidence in the economy because of low unemployment, rising productivity, a strong agricultural sector and fresh advances in technology.