Housing to push economy to edge of recession
Ongoing weakness in the housing market will push the national economy to the brink of recession, but growth in other areas should put the country back on a slow road to recovery by 2009, according to an economic forecast released this morning.
The quarterly Anderson Forecast by the University of California, Los Angeles predicts growth in the gross domestic product of just above 1 percent for the fourth quarter of 2007 and first quarter of 2008, the Associated Press reported.
Economic growth will remain “tepid” for the remainder of 2008 and return to 3 percent in 2009, said David Shulman, senior economist for the forecast.
That rate of growth is just above the traditional definition of a recession: two consecutive quarters of decline in gross domestic product.
“Of course, when the economy slows to a 1 percent pace, it runs the risk of falling into an actual recession, just as when an airplane’s velocity dips down to its ‘stall speed’ and falls out of the sky,” Shulman wrote.
The declining housing market could remain at the heart of the nation’s economic woes for some time, but another key factor affecting the economic slowdown is further credit tightening, which could discourage corporate investment, and the willingness of foreign investors to hold dollar-based assets, the report said.