Moody’s said its near-term growth outlook has been lowered with real GDP now expected to expand at an annualized rate near 2% during the second half of 2011, and just over 3% next year. The firm noted that this is a change from last month’s projected GDP growth at 3.5% during the second half and through 2012. Moody’s said a reduced rate of consumer spending growth accounts for most of the downward revision.

The rating agency said the odds of a renewed recession over the next 12 months are one in three, and rising with each 100-point drop in the Dow. While it remains likely that the recovery will continue, the near-term outlook is significantly weaker that it was just a month ago. Prospects for GDP growth and job creation have “diminished substantially” since our last forecast, Moody’s noted. The economy needs to grow 2.5% to 3% per year to add jobs fast enough to keep the unemployment rate stable; this will not happen soon, Moody’s said.

Moody’s notes that the recovery that appeared at the beginning of the year has been eroded by a series of “unfortunate shocks” that have caused businesses, consumers and investors to lose faith in the economy. Confidence, already fragile after the nightmare of the Great Recession and Washington’s heated policy debates, was severely undermined.

To read the full text of the Moody’s news release: click here.