45pc NABE economists see US recession in '08
Wednesday, 27 February 2008

Xinhua . Beijing

A survey released Monday by the National Association for Business Economics shows 45 per cent of the economists on its forecasting panel expect a recession in the United States in 2008 because job growth is slowing and consumer confidence is plunging.

The survey shows that 55 per cent still believe the country will be able to skate by without falling into an actual downturn, typically defined as two consecutive quarters of declines in the gross domestic output, the broadest measure of economic health.

All the analysts, however, expect growth to slow considerably this year. The forecasters believe GDP will expand by 1.8 per cent this year, which would be the weakest growth in five years.

That compares with an estimate of 2.5 per cent growth for 2008 made in the previous survey, in November. The new estimate is in line with a downgraded forecast from the Federal Reserve this past week.

The NABE forecast reflects the expectation the economy will grow only sluggishly or actually contract from January through June. Then it is seen starting to expand more strongly in the second half of the year.

Helping accomplish that is a 168 billion US dollar federal aid plan, with its rebate checks for millions of families, and aggressive interest rate cuts from the Fed.

Inflation is expected to moderate greatly this year as the weak economy cools price pressures. Inflation shot up by 4.1 per cent in 2007, the biggest jump in 17 years.

The Consumer Price Index is forecast to rise by 2.5 per cent. That is based in part on the NABE panel's view that demand will weaken for oil and the barrel price will drop to about 84 dollars by December.

The current trend, however, is up; crude oil jumped to all-time highs above 100 dollars per barrel over the last week.

The weaker growth will mean higher unemployment, according to the forecasters. They predict that the jobless rate for 2008 will average 5.2 per cent, compared with 4.6 per cent last year.

The latest NABE forecast, however, shows the economy continuing to grow in 2009. It predicts a modest GDP increase of 2.7 per cent for the whole year, compared with the 1.8 per cent expected this year and the 2.2 per cent actual GDP growth in 2007.

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