Obama's stimulus not enough to avert biggest GDP drop

President Barack Obama's stimulus plan will be insufficient to avert the biggest US economic decline since 1946 as consumer spending posts its longest slide on record, according to a monthly Bloomberg News survey.

The world's largest economy will contract 2% this year, half a percentage point more than last month's forecast, according to the median of 50 projections in the survey taken February 2 to February 10. Even as Obama aims to create 3.5 million jobs with a stimulus plan, economists foresee an unemployment rate exceeding 8% through next year.

The forecasts underscore the urgency of a financial rescue that unthaws credit markets to spur business and consumer spending, analysts said. A prolonged economic slump means the Federal Reserve will keep its main interest rate below 1% for the next two years, the survey indicated.

"Without the stimulus, I think we would be negative for all four quarters of 2009," causing an even worse decline, said Nigel Gault , chief US economist at IHS Global Insight Inc. in Lexington, Massachusetts. Even with Obama's plan, consumer spending and the labor market are "spiraling down together," he said.

Economists said they took into account a stimulus of about $800 billion as they assembled their forecasts.

The estimates were submitted before House and Senate lawmakers on Wednesday reached agreement on a $789 billion bill that includes a mix of tax cuts and government spending.