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D.C. gridlock lifts recession chance

Friday, July 27, 2012 - 02:18

July 27 - The biggest drop-off in consumer spending in a year is raising speculation the U.S. will be in recession by year's end or early 2013 unless Washington gets its act together. Jill Bennett reports

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PLEASE NOTE THIS EDIT CONTAINS CONVERTED 4:3 MATERIAL Consumers held on tight to their wallets last quarter, spending at their slowest pace in a year. The government's GDP report shows the economy grew at the weakest pace in nearly a year - raising fears the U.S. is sliding into another recession. Ward McCarthy, Chief Financial Economist at Jefferies & Company: SOUNDBITE: WARD MCCARTHY, CHIEF FINANCIAL ECONOMIST, JEFFERIES & COMPANY (ENGLISH) SAYING: "If the politicians in Washington don't extend the tax cuts by the end of the year I think that will send us into a recession. So we still have a period of time here for them to act but every passing day is another wasted opportunity." And that's being felt more acutely by corporate leaders, with prospective spending cuts and tax hikes scaring employers. Steve Ricchiuto, U.S. Chief Economist at Mizuho Securities: SOUNDBITE: STEVE RICCHIUTO, U.S. CHIEF ECONOMIST, MIZUHO SECURITIES (ENGLISH) SAYING: "The lack of compromise in Washington, that is then affecting CEO confidence, which is keeping them from being willing to go out and hire and invest money that they have been accumulating, and that's part of the problem, the consumer is disconnected from the situation but CEOs aren't and they are the ones at the end of the day who make the hiring decisions." STANDUP: REUTERS REPORTER JILL BENNETT (ENGLISH) SAYING: "CEOs may be more reluctant to hire when they read below the headlines of the latest GDP report: which showed car buyers eased off from making purchases. Consumer spending, which accounts for 70% of U.S. economic activity, is sputtering and the latest Thomson Reuters/University of Michigan shows consumer sentiment is at its lowest of the year." SOUNDBITE: WARD MCCARTHY, CHIEF FINANCIAL ECONOMIST, JEFFERIES & CO (ENGLISH) SAYING: "When you look at other consumer surveys you see for example 60 percent of people think this country is headed in the wrong direction. When you look at something that goes back to the 1970s called the misery index that still is relatively high and I think that is also keeping consumers relatively cautious." And it's not just the consumer sector feeling the pinch, economic data shows slowing manufacturing growth suggests tough days ahead. SOUNDBITE: STEVE RICCHIUTO, U.S. CHIEF ECONOMIST, MIZUHO SECURITIES (ENGLISH) SAYING: "What's actually happening is this economy has no upside momentum and you need very, very little to tip it over the edge." As we approach the end of the year we are heading towards the so-called fiscal cliff, and the GDP report didn't help matters. Jill Bennett, Reuters

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D.C. gridlock lifts recession chance

Friday, July 27, 2012 - 02:18