WASHINGTON — The painful collapse of the housing market along with the credit crunch will weigh down economic growth in the final three months of this year and cause economic activity to lag in 2008.
It all means that the risk of a recession has increased, economic forecasters say.
The latest outlook from the National Association for Business Economics says the gross domestic product is on track to expand at a 1.5 percent annual pace from October through December. If that proves correct, it would mark a sizable decline from the July-September rate of 3.9 percent.
The group’s new fourth-quarter projection compared with September’s prediction of a 2.5 percent growth rate. The GDP – the value of all goods and services produced in the U.S. – is considered the best barometer of the country’s economic fitness.
For all of this year, the forecasters expect the economy to grow by 2.1 percent, which would be the weakest showing since 2002.
The association downgraded its growth forecast for next year – putting it at 2.5 percent, compared with an earlier projection of 2.8 percent.
“While the U.S. economy faces a higher risk of recession from credit markets, housing and energy prices, NABE’s panelists still do not see recession as the most likely outcome,” said Ellen Hughes-Cromwick, the group’s president and chief economist at Ford Motor Co.
