Americans: Recession near - or already here

Nearly half of Americans report already cutting back on purchases due to fears about the economy.

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Consumer outlook: Gloomy

Most of the 1,000 Americans surveyed by Fortune Magazine are very worried about a recession.

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NEW YORK (CNNMoney.com) -- More than three in four Americans believe the U.S. economy is already in a recession, or will be sometime in 2008. That's according to a comprehensive poll commissioned this week by Fortune Magazine.

Only 19 percent of 1,000 Americans surveyed believe the nation will avoid a recession, while 57 percent believe that there will be a downturn this year. Another 19 percent believe the nation is already in a recession.

What's worse for the economic outlook, just about half of those surveyed say that they've cut back their spending compared to last year.

These results indicate a far gloomier outlook than economists anticipated.

"Those are pretty striking results, a pretty stark assessment," said Dean Baker, who is the co-director of the Center for Economic and Policy Research, and one of the economists who believes that the nation may have slipped into a recession in December. He said that if Americans are this worried about the economy, it could cause an even sharper downturn than many economists expect.

"[Consumer] consumption has been what's holding up the economy," Baker said. "I've been surprised by how well it has held up as the housing market plummeted. But it looks like we're coming to the end of that."

Even some economists who don't think economic fundamentals justify the current talk of a recession worry that a change in consumer sentiment by itself could increase the risk of recession.

"If consumers who were only worried [about a recession] actually pull back on their spending reigns, then it becomes a self-fulfilling prophesy," said Rich Yamarone, director of economic research at Argus Research.

Lynn Franco, the director of the research center at the Conference Board, an organization that conducts closely watched surveys of both consumer and CEO confidence, agreed that fear on the part of both of those groups could put the brakes on the economy.

"We're seeing from our CEO and consumer surveys that confidence levels are low and there is rising concern," she said. "We're seeing the same thing here (in the Fortune survey). That in and of itself can cause people to postpone - either hiring or business spending if you're a CEO or personal purchases if you're a consumer."

Indeed, the Fortune poll found that about two out of three people believe that economic conditions in the U.S. are getting worse.

And when asked about their personal economic condition in the last 12 months, nearly four out of ten people said they were worse off than they were a year ago. The poll found 15 percent saying they were falling behind on paying their credit cards, while 9 percent said they were having trouble making mortgage and rent payments.

Additionally, just more than one in four of those surveyed said they are somewhat worried or very worried about losing their job in the next 12 months.

As the presidential election kicks into high gear, the outlook on the economy is somewhat split along party lines, and it appears that the Democrats have the most to gain from the stumbling economy.

Democrats are more than twice as likely as Republicans to believe the nation is already in a recession - 26 percent compared to 12 percent. Republicans are four times more likely to believe the nation will avoid a recession altogether - 32 percent to 8 percent.

But even two of out three Republicans say the nation is either in a recession or heading into one in the next 12 months.

Asked which party is better at keeping the economy healthy, more than half of those who believe the nation is in a recession or heading that way picked the Democrats, while less than a third picked Republicans.

Only those who believe the country will avoid a recession gave Republicans high marks for their handling of the economy, by a three-to-one margin over the Democrats.

The economy was the issue most important to those surveyed, with 87 percent terming it extremely or very important. That edged out the 83 percent who gave the war in Iraq their top priority, or the 81 percent classifying health care that way.

Many economists have focused on problems in the housing and credit markets as the factor most responsible for putting the nation at risk of a recession.

But those polled said that the top culprit was the high price of gasoline, which was cited as the most important or second most important reason for the nation's economic woes by 56 percent of those surveyed. Fifty percent said that companies sending work overseas is the driving force behind the current economic situation.

The poll found 47 percent believe that the housing slump, as well people who are having trouble paying their mortgages, is the most important or second most important reason for a recession.

Fears of a recession have been growing in recent weeks, with more leading economists arguing that either the nation has already fallen into a recession or that one is likely in 2008.

Members of Congress and the Bush administration have begun to discuss what economic stimulus package could be enacted quickly in response to the slowdown in the nation's economy.

Those questioned in the Fortune survey are overwhelmingly in favor of Congress taking a wide range of actions to spur the economy.

The most popular proposal was tax cuts for low and middle income taxpayers, which was favored by just over three of four surveyed. That was closely followed by support for limiting rate increases on adjustable rate mortgages to keep them affordable. About two in three supported increasing government spending on things like public-works projects to help create jobs, while just over half also supported extending unemployment benefits, suspending home foreclosures, tax cuts for businesses and extending the tax cuts passed by the Bush administration in 2001 and 2003 that are due to expire by 2010.

The poll was conducted by telephone from Monday to Wednesday of this week. The margin of error for the entire sample is approximately plus or minus 3 percentage points. It was conducted for the magazine by survey firm Abt SRBI Inc. Public Affairs Center.