The government’s key forecasting gauge officially signaled today that the economy is headed for a recession after eight years of growth, and President Bush said a “serious slowdown” is under way and may worsen.
“Our economy . . . is at best in a serious slowdown, and if uncertainty remains in the energy markets, the slowdown will get worse,” Bush told reporters.
Bush’s comments were made after the Commerce Department reported that the index of leading indicators, which measures a broad range of economic activity, dropped 1.2% in October after declines of 0.8% in September and 1.2% in August.
Due to a delayed revision in the July number, that was a fourth straight monthly deterioration and reflected a range of maladies from cautious consumers to a plunge in stock prices.
Three or more straight drops in the broad-based basket of economic indicators, designed to reveal the direction of the economy for the next six to nine months, are generally considered a sign of a shrinking economy.
Private economists said the fresh data trailed ample evidence that the nation’s gross national product, the total output of goods and services, is contracting.
A commonly accepted definition of a recession is two consecutive quarters of shrinking GNP. The nation’s GNP has risen modestly in the last four quarters, slowing at the apparent end of a record expansion.
Some economists say the country faces a potentially severe recession of up to two years because of an enfeebled banking and financial system, but Treasury Secretary Nicholas F. Brady insisted today that commercial banks so far show only pockets of weakness.
Nonetheless, Brady warned bankers not to withhold lending during hard times because it might hinder economic recovery and anger consumers.
The government originally said the index was unchanged in July but revised that to a 0.1% fall, adding to the impression of an economy worsening quickly.