Among the panel of 49 National Association for Business Economics economists surveyed between January 25 and February 13, about 45 % said they believe a recession will have occurred by the end of this year. But most believe it will be short and shallow. The remaining 55 % said a downturn will be relatively muted.
"US economic growth is expected to slow to a crawl in the first half of 2008," said Ellen Hughes-Cromwick, NABE president and chief economist at Ford Motor Company. While credit availability is generally viewed as a constraint on the overall economy, about 60% of the panelists see a moderate tightening of lending to consumers and businesses. But a similar percentage expect credit market liquidity and functioning to be restored to normal by the end of this year. The consensus forecast among those surveyed calls for real economic output -- as measured by Gross Domestic Product - to grow at a scant 0.4% annual rate in the first three months of this year and by 1% in the second quarter.
"While a slight majority of our panel of our forecasters expects the economy to avoid a recession in 2008, growth is expected to average just 0.75% before accelerating in the second half in response to fiscal and monetary stimulus," said Hughes-Cromwick.The economists say that the stimulus package, signed into law earlier this month, with tax breaks for businesses and tax rebates worth up to $600 per individual and $1,200 per couple, could boost economic growth in the second half to a 2.8% annual rate. That would bring growth for the year to 1.8%, still down significantly from the 2.6% growth projected in the prior survey taken in November.
About 40% of those surveyed said the fiscal stimulus package will help ward off a recession. Another 30% believe it will keep any recession short and mild and the remaining 30% polled believe the package will either have a negligible impact, is unnecessary, or is coming too late.
The NABE panel significantly trimmed its estimates for consumer spending and housing and cut the outlook for business inventory accumulation. The housing slump is likely to have a "major negative impact" on consumer spending this year, according to more than 60% of the economists polled.