Boom2Bust.com

Recession Fears Grow As America Looks To Stimulus Plan

The Associated Press reported earlier today that President Bush and Federal Reserve Chairman Ben Bernanke have “embraced calls” for an economic stimulus package to avert recession. Bernanke warned Washington politicians, however, that any delays would be costly:

To be useful, a fiscal stimulus package should be implemented quickly and structured so that its effects on aggregate spending are felt as much as possible within the next 12 months or so.

While in Jordan today, U.S. Energy Secretary Sam Bodman told reporters that the probability of a U.S. economic recession is growing and high oil prices pose a significant problem for the world’s largest energy consumer. According to Reuters, Secretary Bodman said global oil supplies were not as high as the U.S. would like, but he stopped short of repeating President Bush’s call earlier this week for OPEC to boost supplies. Bodman revealed:

There are certainly signs that we are facing economic challenges and I think that the probability of a recession is now greater than it has been in the past… In my view, there is some evidence that suggests that supplies are less than we would like to see.

The Agence France-Presse (France) said yesterday that the International Energy Agency (IEA) attributed recent record oil prices above $100 per barrel to not only tensions in the marketplace, but also falling stocks in top consuming countries. In its monthly oil report, the IEA said:

The most recent rise would appear the easiest to explain: OECD stocks have been falling since July 2007, reflecting a tightening physical market… Total OECD oil inventories are now below five-year average levels.

The OECD area includes the 30 member countries of the Organisation for Cooperation and Development, which includes North America, Europe and Asia’s most industrialized economies.

The AFP noted that the IEA statement appears to be at odds with OPEC Secretary General Abdullah al-Badri, who told the AFP yesterday that the market was adequately supplied and that OECD stocks were within their five-year averages. The IEA left its 2008 forecast for oil demand unchanged on Wednesday. The Paris-based organization predicts that strong oil demand will continue regardless of a U.S. economic slowdown.

“Shop Smart, shop S-Mart, you got that?”

Two recent Reuters polls also reflect the growing concerns over a recession in the United States. A survey of 100 analysts taken between January 11 and January 16 revealed yesterday that the risk of a U.S. recession has grown to 45% from 40% last month. According to Reuters, this percentage has steadily increased from 30% in October. Also on Wednesday, a Reuters/Zogby poll conducted on January 10 and 11 revealed that of 1,006 eligible American voters surveyed, 47.5% said they think a recession is likely in 2008. This figure was up from 43.4% in the prior month. For the first time since the recession question was added to the monthly poll back in September 2007, more people said a recession was likely than unlikely.