U.S. Economy ‘Near Recession,’ Forecasters Say

By Rex NuttingRISMEDIA, Sept. 17, 2007-(MarketWatch)-The U.S. economy will fall perilously close to recession in the next year, but will probably continue to grow at a very slow pace, according to the latest UCLA Anderson Forecast released last week.

Strong growth in exports and business investment should be enough to avoid a “classic recession,” said economists at the UCLA Anderson School of Management.

“The decline in housing starts and consumer durables will drive the economy down to near-recession levels of 1% growth for two consecutive quarters,” beginning in the fourth quarter, the quarterly report said. The economy won’t return to stronger growth around 3% until 2009.

“When the economy slows to a 1% 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,” said David Shulman, senior economist at UCLA Anderson Forecast.

The UCLA Anderson Forecast was one of the few to predict the 2001 recession.

Shulman’s team is forecasting housing starts will fall to a 1 million to 1.1 million annual pace, from about 1.38 million currently and about 2.3 million at the peak. The recovery in housing is expected to be very tepid, with starts rebounding to about 1.4 million by the end of 2009.

Rex Nutting is Washington bureau chief of MarketWatch.

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