A majority of Americans expect a recession in the next year as the housing downturn deepens, inflation rises and credit conditions tighten, a Reuters/Zogby poll released on Wednesday showed.
The survey of 1,105 likely voters found that 54 percent thought a recession was looming. It was the first time since the recession question was added to the monthly poll in September that more than half predicted such a downturn.
As economic anxiety grows, nearly half of those surveyed said they planned to use their government rebate checks to pay down debt or pad savings. That would blunt the impact of the $168 billion stimulus plan that President George W. Bush signed into law last week in a bid to stave off a recession.
There are hard times ahead. It's a good time to get out of debt if you've got a freebie coming, pollster John Zogby said.
When asked about how they would use rebate checks worth up to $600 per individual and $1,200 per couple, just 16 percent said they would spend it all, and a similar number intended to save it all. Nearly one in three said they would pay down debt, while 27 percent said they would spend some and save some.
The stimulus plan was aimed at bumping up consumer spending to bolster the economy. If households instead save the money or use it to reduce debt, the economic boost will be limited.
Economic worries have supplanted the Iraq War as the top issue in this year's U.S. presidential election as the housing market fallout takes its toll. Less than one in four gave the Bush administration high marks for U.S. economic policy.
Americans remained downbeat about housing, with three out of four expecting home prices to hold steady or fall in the next year. That was little changed from a month ago.
The poll, conducted January 13-16, found that less than 40 percent thought the U.S. economy would sidestep a recession. A month ago, 47.5 percent said they expected a recession, while 44.6 percent did not.
Those nearing retirement age were particularly concerned about recession. Among those ages 50 to 64, 61.2 percent expected a recession, making them the most pessimistic group.
That group includes a large portion of the Baby Boomer generation born in the nearly two decades after the Second World War. Much of their savings is tied up in home equity and stock-based retirement plans, both of which have been under pressure in the past year.
Zogby, who at age 59 counts himself among that group, said older boomers were increasingly putting off retirement or cutting back on spending for fear of outliving their savings, so worries of a recession hit them particularly hard.
We began as an anxiety-ridden generation and that's how we're going to punch the time clock, too, he said.
The poll had a margin of error of plus or minus 3 percentage points.