Economic Clouds To Linger, Forecasters Say

Report: The Economy Will Weaken Further Even Though Housing, Credit May Improve

(AP)  First the good news: The worst of the painful housing slump and the credit crunch might come to an end this year. Now the bad: The economy will weaken further and unemployment will rise.

That's the latest outlook from forecasters in a survey to be released Monday by the National Association for Business Economics, also known by its acronym NABE. It will take time for any rays of light to poke through the economic clouds, though.

A growing number of economists believe the country is on the brink of a recession or in one already, dragged down by all the problems in housing, credit and financial markets. Now 56 percent of the economists think the economy has started or will enter a recession this year. That's up from 45 percent in a survey in February. If there is a recession, it probably will be short and shallow, economists said.

Forecasters downgraded their projections for economic growth. They now predict the economy, which grew by 2.2 percent last year, will slow to 1.4 percent this year. That's lower than the 1.8 percent growth projected in February. If the new figure proves correct, it would mark the weakest growth since the last recession in 2001.

Next year, the economy should grow by 2.3 percent, less than previously forecast and a pace that is still considered subpar.

"Although housing and credit markets will gradually loosen their grip, U.S economic growth is expected to only slowly return to health," said Ellen Hughes-Cromwick, president of NABE and chief economist at Ford Motor Co.

Given the outlook for sluggish overall economic activity, companies are likely to remain cautious in their spending and hiring.

The unemployment rate, which averaged 4.6 percent last year, will move higher. Forecasters predict the jobless rate will hit 5.3 percent this year and 5.6 percent next year.

Forecasters are hopeful that the housing slump - in terms of home sales - will hit bottom this year. However, economists were divided over whether the low point would be reached in the second, third or fourth quarters of this year. House prices, though, are still expected to drop this year and next.

On the credit front, economists predict conditions will improve in the second half of this year.

"The economy is still going to be weak in the very near term, but the worst is likely to end this year with respect to the housing decline and the credit crunch," said Lynn Reaser, chief economist at Bank of America's Investment Strategies Group, who was involved in the NABE survey. The survey of 52 forecasters was conducted April 17 through May 1.

Weakness in housing was cited as the factor most responsible for the economy's troubles. That was closely followed by credit problems and high energy, food and commodity prices.

With food prices marching upward, gasoline prices closing in on $4 a gallon nationwide and oil hitting a record high near $128 a barrel, inflation should rise. Consumer prices will increase 3.6 percent this year, up from a previous forecast of a 3 percent rise. Next year, prices should calm down a bit, with the inflation rate clocking in at 2.4 percent.

To bolster the economy, the Federal Reserve has been cutting a key interest rate since last September. However, when the Fed last lowered rates, in April to 2 percent, policymakers signaled that their rate-cutting campaign may be drawing to a close. Fed policymakers are concerned that moving rates lower could aggravate inflation. At the same time, they are hopeful that their powerful rate cuts plus the government's $168 billion stimulus package of tax rebates for people and tax breaks for businesses will lift the country out of its slump.

The forecasters believe the Fed will hold its key rate steady at 2 percent though the rest of this year. However, they predict the Fed will start bumping up rates next year to ward off inflation. They believe the Fed's key rate will rise to 3 percent by the end of 2009.

Economists, meanwhile, had mixed thoughts about the extent to which tax rebates will be spent this year. The more spent, the more energizing effect they will have on the economy. Roughly 35 percent thought households will spend 26 to 50 percent of the rebates, while a quarter believe 25 percent or less would be spent. Thirty-one percent thought 51 to 75 percent would be spent.

"We're likely to see the boost from tax rebates fading later in the year," Reaser predicted. "The recovery is expected to be quite muted."

[mrcommoncents]

Regards to the comments by Dale Orr and othere so called economists,
you people may have facts and figures at your fingertips but you have a lot to learn about the IMPACT OF YOUR WORDS, you don't seem to know the first thing about human nature or do you? Are you stoking the fear factor for your own profit ? or do you just not care that every time you make one of your "famous" predictions the world stockmarkets either make people like you richer or people like me poorer because our investments are damaged by your NEGATIVE FORCASTS. The main problem is that with a very little research you make what can only be described as assinine statments that any person with common sense can predict but because you have the MEDIA connections every politician and stockmarket trader JUMPS at your words and we wind up deeper and deeper in recession - just give us a break and say nothing; let the media report GOOD and Bad information without your so called intelegent information and "BEST GUESSES" attached to it. My prediction is that optmisim,carefull spending and less time thatn you predice will result in Global growth by the end of 2010. Remember the previous growth of 2007-08 was NEVER SUSTAINABLE - INCOMES ONLY GO SO FAR - AND TOO MUCH EASY CREDIT HAD ALREADY BEEN GIVEN, SO NO YOU WILL NEVER -LET ME REPEATE FOR THE DUMMIES AMONG YOU - NEVER - SEE THAT TYPE OF GROWTH - IN THAT TYPE OF TIME PERIOD AGAIN !!!!! -- STOP PREDICITING THE OBVOIUS.

[skyk-2009]

Give me MORE trickle down!! I can''t wait!! 4 MORE years of Trickle Down should qualify me for food stamps and public assistance!

[Gary Kempf]

Economist are titled idiots, CBS, CNN, NBC, ABC, which ever media organization you choose. They all use the same economic idiots, these are the same people that claimed that no recession existed until it hit the stock market. Anyone that works for a living have known since Katrina. Until somebody reports facts instead of fantasized garbage, and politicians do what is right for America and not just the wealthy and corporations we will continue to see America spiral down the road of financial ruin

[nonayabiness]

I''m waiting for the stock market crash so I can get back in really cheaply.

[stn_sage]

My overall point is, this story puts too much of a positive spin on the economic news---not that it denys there is a lot of existing problems with it!

[stn_sage]

At what point will the media and this govt admit what the average citizen has known for months---that we''re in a recession?!

How many economists constitute a quorum to declare a recession exists?! 50,000!? 60K?! What nonsense!!

Most of the indicators have NOT improved and continue to trend negative, so what''s with the rosy report?!
Is this an attempt by the media to help Rep politicians by misinforming us about the condition of the economy?

I think the public needs to start ''taking names'', noting stories, and holding the media responsible if they''re going to publish economic news that distorts or misinforms the public on the health of the economy!

If this was going on during a Dem admin---you can bet---Reps would be screeching ''foul'' at the top of their lungs! We''re not even close to ''the bottom'' yet. And, you can quote me on that.

[mcv57]

It''''s going to take a long, long time to fix the financial mess wreaked on this country by the republicans.

This really shouldn''''t be surprise to anyone.

Posted by hungry1968

Indeed, most likely you will not see prosperity nor your great, great, grandchildren. History dictates that only hunger or civil war will defeat the rich.

[ov442]

Their solution to keeping inflation at bay is to just raise rates across the board so everything is so expensive that only people with plenty of money can buy stuff, except people in desperate need of something will then pay through the nose for it, and further cause people harm. All with the true result of nothing, since all of the current inflation is being wrought by the skyrocketing energy prices fueled by OIL, of which raising rates does NOTHING To stop.

[jn122736]

We are in debt to the tune of 9.5 TRILLION Dollars.. this from a party that PROMISED they would cut spending to KEEP the budget balanced. We paid out 450 MILLION Dollars last year alone just to support that debt... that''''s a TAX INCREASE you MORON''''s the money to pay for all those dollars BORROWED by the fascist??? It come''''s out of OUR pockets!! It''''s amazing you people can get out of bed in the mornings!! READY??? Sing it out!! Sieg Heil Bush!!
Posted by MCVet at 08:20 AM : May 20, 2008
~~~~~~~~~~~~~~~~~~~~~

MCVet, Your figures are off a bit.

You said, ""We paid out 450 MILLION Dollars last year alone just to support that debt... that''''s a TAX INCREASE""

You are right about that being ,in effect, a tax increase, but you need to multiply that 450 million by 1000 the correct fogure is 450 BILLION (one half TRILLION)for 2007 alone.

We have paid a total of $2.5 trillion in interests on the national debt just for the Bush years 2001 through 2007.

[forthepeopl1]

SO WHAT HAPPEN BIG GUY, PAULSON


Treasury Secretary Henry Paulson said Friday that financial markets are "considerably calmer" now than they were two months ago. He predicted the economy will be rebounding by the second half of this year.

In a speech to business executives in Washington, Paulson said the drag from housing, which he characterized as still the biggest risk to the economy, will soon be lessened by nearly $100 billion in economic stimulus payments to U.S. households.

"The fiscal stimulus will provide support to the economy as we weather the housing correction, capital markets turmoil and higher energy and food prices," Paulson said in his prepared remarks.

The economy has been pushed to the brink of a recession by a prolonged housing slump, a credit crisis, soaring energy prices and more than a quarter-million job layoffs over the past four months.

[forthepeopl1]

First the good news: The PRESIDENT AND VICE PRESIDENT WITH RICE,RUMSFELD,ROVE AND ALL THE REST OF HIS SCUM BAGS LIKE PAULSON, AND BEN JUST JUMP OFF THE TOP OF THE WHITEHOUSE TO THEIR DEATH, JUST BEFORE MILLIONS OF AMERICAN WERE ABOUT TO BRAKE FENCES AND HANG THEM ON THE FRONT LAWN OF THE WHITEHOUSE, FOR WHAT THEY HAVE DONE TO ALL AMERICA, AND ALL AMERICANS.

The worst of the painful housing slump and the credit crunch might come to an end BY THE YEAR 2012 Now the bad: The economy will weaken further and unemployment will rise. AND WE FINELY GO INTO A LARGE DEPRESSION..CANT WAIT..FREINDS AND FAMILY AND NAIBORS FIGHTING TO STAY ALIVE...

That''s the latest outlook from forecasters in a survey to be released Monday by the National Association for Business Economics, also known by its acronym NABE. It will take time for any rays of light to poke through the economic clouds, though.

A growing number of economists believe the country is on the brink of a recession or in one already, dragged down by all the problems in housing, credit and financial markets. Now 56 percent of the economists think the economy has started or will enter a recession this year.

[sjc_1]

faith_in_w is either a troll trying to get people angry or brainwashed. The facts speak for themselves and no amount of spinning will change that.

It is like ABC network''s pathetic attempt to rewrite history about al Qaeda and the "fly swatting" quote from W. He completely ignored the terror threat which led to 9/11. ABC wanted to make it look like something completely different.

[element51]

faith_n_W....Just when I thought I had seen it all, along comes your post. It has to be the stupidist thing I have ever read. In fact, it is SO stupid that I have concluded that you are either A.Trying to be funny or B.Some kid with a warped sense of humor trying to get a rise out of the other posters out here. No one in their right mind could possibly believe what you have posted. If A is the answer, thanks for the laugh...If B is the answer, go mow the yard.

[nbrdknkldgr]

The US is going the way of the Roman Empire and this is just the beginning of the end. Greed and Arrogance...this country is in the midst of the perfect storm and Republicans have led us there!

[hungry1968]

It''s going to take a long, long time to fix the financial mess wreaked on this country by the republicans.

This really shouldn''t be surprise to anyone.

[msay3]

People who complain the most about the recession are the ones who didn''t plan ahead for the rough ride.....

[msay3]

"Anyone with half a brain will tall you that Clinton mismanaged the economy and we were in rough shape when Bush took office."
Posted by faith_in_w
-------------------------------
Bill Clinton may not have set a good example of faithfulness, but he DID balance the budget during his term...Give the devil his due...

[cattlekate]

Posted by jamesm12341 at 06:41 PM : May 19, 2008

And if I post something about your chickenhawk impotence, where you must use the cloak of anonymous posting to make yourself feel like a real man, will you go away? Please?

(PS I think faith_in_w is a satirist.)

[mcvet]

I dont see why you are so upset with free market capitalism but good luck in your job search.


--------------------------------------------------------------------------------

Posted by faith_in_w at 12:32 PM : May 19, 2008
+ report abuse

Well then YOUR fuhrer flat out lied to you... as if THAT was news. In a news conference when he was working to get his tax cuts for the Rich HE said the Economy was very strong and would have NO trouble making up for the cuts. As USUAL he LIED. The Facts are there for any fool to see.. He was handed a Balanced Budget.. there is NO argument on that. He was handed a surplus... no argument there either. The Economy was growing.. no argument there. Unemployment was at record lows... no argument there. Look at us NOW!! Would you swastika huggers PLEASE look at this nation today! We are in debt to the tune of 9.5 TRILLION Dollars.. this from a party that PROMISED they would cut spending to KEEP the budget balanced. We paid out 450 MILLION Dollars last year alone just to support that debt... that''s a TAX INCREASE you MORON''s the money to pay for all those dollars BORROWED by the fascist??? It come''s out of OUR pockets!! It''s amazing you people can get out of bed in the mornings!! READY??? Sing it out!! Sieg Heil Bush!!

[sjc_1]

There have been economic ups and downs before, but I can not recall a time when so many of the fundamentals were going in the wrong direction at the same time. I don''t think that I have to list them, most of us are aware of what they are.

Couple that with the seeming lack of action on the part of this present administration. I know they have been secretive, less than forthcoming and sometimes downright deceptive, but when it comes to this everyone has a stake in the outcome.