Nearly six in 10 Americans think that an economic depression is likely, according to a CNN/Opinion Research Corp. poll released yesterday. Of the respondents, 21 percent said that a depression is very likely and another 38 percent said it was somewhat likely. The poll of more than 1,000 Americans was conducted over the weekend.
An economic snapshot of the economy in the 1930s—the era of the Great Depression—was provided to those surveyed. Hallmarks of the Depression included widespread bank failures; an unemployment rate of 25 percent; and the inability of millions of Americans to feed and house their families.
Of those who didn’t believe that a depression is inevitable, 29 percent said a depression is not very likely and 13 percent said they feel that a depression is not likely at all.
Overall, the views of economists match up with the less dire outlook held by the 42 percent who don’t believe that a full-blown depression is waiting in the wings.
"Economists, even many who feel current economic risks are dire, generally don’t believe another depression is likely," according to CNN Money.
"We’ve been in a recession all year and it’s going to get worse," CNN Money quoted Anirvan Banerji, director of research for the Economic Cycle Research Institute, as saying. "We’re going from a relatively mild recession to a more painful recession. But we’re a long, long way from a depression."
The Economic Cycle Research Institute (ECRI), an independent forecasting group based in New York, has a recession-recovery watch page on its website. The recession-recovery watch tracks home price data; monthly leading, coincident and lagging indexes; weekly leading index growth; and the future inflation gauge, or FIG. Free registration is required to view this page.
According to data released Friday by ECRI, inflation pressures in the U.S. fell in September to a low not seen in more than six years. The USFIG, which was designed to anticipate cyclical swings in inflation rates, fell from 107.3 in August to 103.7 in September. The index is at its lowest point since May 2002, when it stood at 102.1.
The drop was caused by disinflationary moves in loans and interest rates, commodity prices and labor market conditions; it was also partially offset by an inflationary move in a measure of vendor performance, according to ECRI managing director Lakshman Achuthan.
"With the USFIG diving to a new 76-month low, underlying inflationary pressures are clearly in rapid retreat," Achuthan said, according to Reuters. "The (index’s) well established downturn strongly counters any inflation fears that may still be concerning Fed officials."
Any fears assuaged by the drop in inflationary pressures are likely to return in the face of an annualized measure of future U.S. economic growth dropping to its lowest point since the recession in the 1970s.
ECRI’s Weekly Leading Index (WLI) ticked up slightly from the previous week, up from 122.1 in the week ending Sept. 19 to 122.2 in the week ending Sept. 26.
The annualized growth rate, however, dropped from -12.3 percent to -13.3 percent, its lowest point in 33 years. The low point of -13.7 percent—recorded Feb. 25, 1975—came at the tail end of a severe recession.
The slight uptick seen near the end of last month was caused by higher commodity and stock prices, but any gains were almost entirely offset by weak activity in the housing market and rising interest rates.
"With WLI growth plunging to its lowest reading since the severe 1973-75 recession, the 2008 recession is set to get noticeably worse," Achuthan said, according to Reuters.