• Consumer spending has seen the worst performance since the 1992 recession with a contraction of 3.1% q/q AR in Q3. Recent data suggest that the Q4 performance could be even worse, and that a stabilisation is not within reach before next year. Hence, GDP for 2009 is now tracking somewhat below our standing forecast of 0.0%.
• Although falling energy prices are delivering a 'super boost' to consumption in Q4 and Q1, consumers are currently facing significant headwinds due to unusually tough financial conditions and negative labour market dynamics. On top of this, recessionary dynamics seem to have become selfperpetuating.
• Unfortunately, the energy boost will deliver only a one-off effect for Q4 and Q1, while financial conditions will act as a brake for much longer. Moreover, the labour market will take quite a long time to recover. Hence, consumers face an uphill battle and the outlook is for a very slow recovery and below trend growth throughout 2009.
• The risks to our forecasts are larger than usual, as the combination and force of the shocks facing US households are quite extreme. Importantly, though, risks are not only skewed to the downside. A second round of fiscal stimulus (expected to be in the range of USD 100300bn) looks increasingly likely early next year, providing some potential upside risk.
