www.bloomberg.com/apps/news?pid=20601087&sid=aEX73qWiBrb4
Economic growth will average 15 percent in the first six months of 2008, matching the fourth quarter's pace, according to the median estimate of 62 economists surveyed by Bloomberg News from Jan. It's soft economic activity that feels like a recession, but we probably won't have one,'' said Mickey Levy, chief economist at Bank of America Corp. The state of the consumer is clearly softening, but spending is not declining. Economists put the odds of a recession developing within the next year at 40 percent, according to the median estimate. Nine of the 47 economists responding to the question put the odds at about even and five said the economy would contract. economists now predict a recession, joining their counterparts at Merrill Lynch & Co. Bonds, Stocks Treasury yields have fallen and stocks in the US have dropped as the economic outlook deteriorated. Yields on benchmark 10-year notes yesterday reached 377 percent, the lowest since March 2004. The Standard & Poor's 500 stock index yesterday fell to the lowest closing level since March. Growth forecasts were lowered for every quarter of the year, even as the estimate for the last three months of 2007 was boosted. The world's largest economy will expand 21 percent in 2008, down from 23 percent forecast last month and the weakest since 2002. We're skating on the thin edge of a recession, but we'll narrowly miss one,'' said Jay Bryson, global economist at Wachovia Corp. Spending Growth Spending grew at a 26 percent annual pace during the holidays last quarter, little changed from the previous three months and about a percentage point faster than predicted in December, according to the survey median. Economists pared estimates for the first six months of this year and boosted the forecast for the third quarter. The Fed will reduce borrowing costs in both the first and second quarters, bringing the benchmark interest rate down to 35 percent by mid-year. Last month, economists forecast the Fed would reduce the rate just once more and hold it at 4 percent through 2008. Interest-rate reductions will eventually stimulate demand,'' said Bank of America's Levy. Growth in the second half of the year will pick up to an average 25 percent pace, according to the latest estimates. Rising exports and business investment will also help keep the economy's head above water. Still, growth concerns will trump some policy makers' unease about inflation as food and fuel prices climb, economists said. Impact From Housing The housing slump, now in its third year, will lead to more foreclosures that will further depress property values, making Americans feel less wealthy. Employment, once a bright spot, may now become another headwind for consumers. The economy created just 18,000 jobs in December, capping the worst year for hiring since 2003, government data showed last week. The jobless rate jumped to a two-year high of 5 percent as builders, mortgage companies and manufacturers reduced payrolls. The increase in unemployment convinced Harvard University economist Martin Feldstein, head of the National Bureau of Economic Research and member of the committee that determines when recessions begin and end, that a downturn was on the way. We are now talking about more likely than not,'' Feldstein said in a Jan. Combined November-December purchases probably amounted to the weakest holiday season in five years, according to forecasts from industry groups including the International Council of Shopping Centers. The debate here is whether the economy is quite weak or whether it is falling into a recession,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut.
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