Economy to Skirt Recession, but Growth Said to Crawl

WASHINGTON (Reuters) – The U.S. economy will likely avoid arecession but growth will slow to a crawl during the first half of thisyear, a panel of business economists forecast on Monday.

Among the panel of 49 National Association for Business Economicseconomists surveyed between January 25 and February 13, about 45percent said they believe a recession will have occurred by the end ofthis year. But most believe it will be short and shallow.

The remaining 55 percent said a downturn will be relatively muted.

"U.S. economic growth is expected to slow to a crawl in the firsthalf of 2008," said Ellen Hughes-Cromwick, NABE president and chiefeconomist at Ford Motor Company.

While credit availability is generally viewed as a constraint on theoverall economy, about 60 percent of the panelists see a moderatetightening of lending to consumers and businesses. But a similarpercentage expect credit market liquidity and functioning to berestored to normal by the end of this year.

The consensus forecast among those surveyed calls for real economicoutput — as measured by Gross Domestic Product — to grow at a scant0.4 percent annual rate in the first three months of this year and by 1percent in the second quarter.

"While a slight majority of our panel of our forecasters expects theeconomy to avoid a recession in 2008, growth is expected to averagejust 0.75 percent before accelerating in the second half in response tofiscal and monetary stimulus," said Hughes-Cromwick.


The economists say that the stimulus package, signed into lawearlier this month, with tax breaks for businesses and tax rebatesworth up to $600 per individual and $1,200 per couple, could boosteconomic growth in the second half to a 2.8 percent annual rate.

That would bring growth for the year to 1.8 percent, still downsignificantly from the 2.6 percent growth projected in the prior surveytaken in November.

About 40 percent of those surveyed said the fiscal stimulus packagewill help ward off a recession. Another 30 percent believe it will keepany recession short and mild and the remaining 30 percent polledbelieve the package will either have a negligible impact, isunnecessary, or is coming too late.

The NABE panel significantly trimmed its estimates for consumerspending and housing and cut the outlook for business inventoryaccumulation. The housing slump is likely to have a "major negativeimpact" on consumer spending this year, according to more than 60percent of the economists polled.

New home starts are expected to total just 1.0 million units in2008, down from the 1.2 million units projected in November and the 1.5million units forecast as recently as last May.

(Reporting By Joanne Morrison; Editing by Dan Grebler)