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The economic slowdown in the U.S. will be deeper and the recovery weaker than previously forecast, according to a Bloomberg News monthly survey.

The world's largest economy will grow at an annual rate of 0.3 percent from January through June, a half point less than projected in February, according to the median estimate of 62 economists polled from March 3 to March 10.

Rising fuel prices, shrinking payrolls and falling home values will weaken consumer spending and blunt the impact of tax rebates that start going out in May. The Federal Reserve, struggling to offset the credit crunch and housing contraction, will cut the benchmark interest rate by another percentage point and keep it at 2 percent through December, the survey predicts.

“We're now more pessimistic about the pace of recovery into 2009,'' said Richard Berner, co-head of global economics at Morgan Stanley in New York. “We now see the Fed pursuing a slightly more accommodative path for monetary policy than just a week ago.''

The odds of a recession over the next 12 months were pegged at 50 percent, the same as in the February survey, according to the median estimate of 42 economists that responded to the question.

“The debate is shifting from whether it is a downturn to how long and how deep it will be,'' said Kurt Karl, chief U.S. economist at Swiss Re in New York. “We have a 55 percent probability of recession. Now it looks like it's starting in the current quarter.''

Trade Deficit

A report today is forecast to show the trade deficit widened in January to $59.5 billion from $58.8 billion the prior month as an increase in the cost of imported oil outpaced gains in exports, a separate survey of economists showed. Increasing demand from overseas is one factor still supporting growth.

The economy's rate of expansion anticipated for all of 2008 fell to 1.4 percent, the weakest since the last recession in 2001. Economists cut the projected rate for the first quarter to a 0.1 percent annual pace, from a 0.5 percent rate in the prior survey. They saw second-quarter growth at 0.5 percent, down from the 1 percent forecast last month.

The growth rate in the last since months of the year was reduced to 2.2 percent from an average 2.4 percent forecast in February.

A recession “looks quite likely,'' Harvard University economics professor Jeffrey Frankel said in a March 7 interview on Bloomberg Television http://payday-nofax.com online payday loan. Frankel, a member of the National Bureau of Economic Research panel that determines when downturns begin and end, said he was speaking for himself, not as a member of the committee.

Slower Spending

Consumer spending, which accounts for more than two-thirds of the economy, will rise at a 0.5 percent annual rate from January through March, down from a 1.9 percent pace in the fourth quarter of 2007 and the weakest since it declined in the last three months of 1991.

“We're seeing the drop in home prices accelerate, and we're seeing persistent energy-cost pressures,'' said Ethan Harris, chief U.S. economist at Lehman Brothers Holdings Inc. in New York. “Both of those developments have been worse than expected.''

The unemployment rate will climb to 5.5 percent by year- end, according to the survey median. It unexpectedly fell to 4.8 percent last month as some people gave up looking for work and left the labor force. The economy lost 63,000 jobs in February, the most in five years, the Labor Department said last week.

Lower Rates

Economists in the Bloomberg survey forecast the Fed will lower the benchmark rate by a half point to 2.5 percent by its next meeting on March 18. Investors are betting policy makers will be more aggressive and cut the rate by three-quarters of a point on or before the gathering, futures trading shows.

The central bank cut the rate by 1.25 point to 3 percent over nine days in January, the fastest reduction since the federal funds rate became the main policy tool around 1990.

Fed Chairman Ben S. Bernanke has repeated in recent weeks that, while the Fed won't ignore inflation risks, it is ready to continue to act in a “timely manner'' to combat “downside risks'' to the economy.

Analysts surveyed forecast consumer prices would rise 2.6 percent this year, more than projected in February.

“We're going to get recession and inflation,'' John Ryding, chief U.S. economist at Bear Stearns & Co. in New York, said in an interview with Bloomberg Television. “The best-case scenario is two-to-three quarters of mild recession followed by a tepid recovery.''

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