A panel of economists expects the U.S. to avoid a recession
WASHINGTON: The U.S. economy will probably avoid a recession, but growth will slow drastically during the first half of this year, a panel of business economists forecast Monday.
On the panel of 49 economists in the National Association for Business Economics who were surveyed between Jan. 25 and Feb. 13, 55 percent said the slowdown would be relatively mild.
The remaining 45 percent said they believed a recession would occur by the end of this year, though most of them expected it to be short and shallow.
“U.S. economic growth is expected to slow to a crawl in the first half of 2008,” said Ellen Hughes-Cromwick, the organizations president and chief economist at Ford Motor.
Credit availability is generally viewed as a constraint on the overall economy, and about 60 percent of the panelists forecast a moderate tightening of lending to consumers and businesses. But others expected credit-market liquidity and functioning to be restored to normal by the end of this year.
The consensus forecast among those surveyed calls for real economic output - as measured by gross domestic product - to grow at a scant 0.4 percent annual rate in the first three months of this year and by 1 percent in the second quarter.
“While a slight majority of our panel of our forecasters expects the economy to avoid a recession in 2008,” said Hughes-Cromwick, “growth is expected to average just 0.75 percent before accelerating in the second half in response to fiscal and monetary stimulus.”
The economists say that the stimulus package, signed into law earlier this month, with tax breaks for businesses and tax rebates worth as much as $600 per individual and $1,200 per couple, could lift economic growth in the second half to a 2.8 percent annual rate.
That would bring growth for the year to 1.8 percent, still down significantly from the 2.6 percent growth projected in the prior survey, taken in November.
About 40 percent of those surveyed said the fiscal stimulus package would help ward off recession. Another 30 percent believed it would keep any recession short and mild, and the remaining 30 percent said the package would either have a negligible impact, was unnecessary or was coming too late.
The panel significantly trimmed its estimates for consumer spending and the housing market and cut the outlook for business inventory accumulation. The housing slump is likely to have a “major negative impact” on consumer spending this year, according to more than 60 percent of the economists.
Starts for new homes are expected to total just 1.0 million units in 2008, down from the 1.2 million units projected in November and the 1.5 million units forecast as recently as last May.
Growth zero, Greenspan says
U.S. economic growth has stalled and the longer it stays at zero, the more likely the worlds largest economy will start to contract, said the U.S. Federal Reserves former chairman, Alan Greenspan, Reuters reported from Jidda, Saudi Arabia.
“As of right now, U.S. economic growth is at zero,” Greenspan said at an investment conference in Jidda.
In updated economic forecasts released last week, the U.S. central bank lowered its outlook for 2008 growth by a half percentage point to between 1.3 percent and 2 percent, citing the prolonged housing slump and bottlenecks in credit markets.
The Federal Reserve said at the time that it was worried the economy could face further setbacks, even after a series of interest rate cuts.
Greenspan also said a boom in oil prices, which hit a record of $101.32 last Wednesday, would “go on forever.” Soaring crude prices have kept U.S. inflation high, even as growth slows.
