by Martin H.
Bosworth
ConsumerAffairs.com
November 19, 2007
Gloomy economic forecasts from a roundtable of business executives and the nation's home builders cemented fears that the housing slump and larger credit crunch will slow down growth well into 2008 and increase the risk of recession.
The National Association for Business Economics (NABE) released statistics saying that the United States' gross domestic product (GDP) is on track to expand at a pace of 1.5 percent pace from October through December, a marked decline from the July-September rate of 3.9 percent.
The prediction for 2007's overall economic growth was 2.1 percent, the worst showing since 2002.
Although the NABE roundtable stated that it believed the U.S. economy could dodge a recession, it revised its 2008 economic growth forecast from 2.8 percent to 2.5 percent.
Ellen Hughes-Cromwick, NABE president and chief economist at Ford Motor Company, said that, Our panel of forecasters sees growth gradually picking up from the sluggish pace projected for this quarter."
Meanwhile, a new report from the National Association of Home Builders (NAHB) found builders' confidence remained at record lows.
The NAHB surveyed 335 builders to rate perceptions of current single-family home sales and sales expectations for the next six months as either good, fair or poor. The survey respondents' grade was 19 of a possible 50 or over, the lowest since the survey was first conducted in 1985.
The message from todays report is that builders do not see any significant change in housing market conditions as compared to last month, said NAHB Chief Economist David Seiders. While they continue to work down inventories of unsold homes and reposition themselves for the markets eventual recovery, they realize it will be some time before market conditions support an upswing in building activity most likely by the second half of 2008.
The stock market, already sliding on bad news from the banking sector, tumbled further after the NAHB report. The Dow Jones Industrial Average dropped 200 points in early afternoon trading.
Bad Tidings
The NABE and NAHB reports are only the latest in a series of negative predictions for the economy in recent weeks. The ongoing slump in the housing market shows no signs of letting up, and banks are writing off millions in losses from exposure to the subprime market, while consumers are showing increasing wariness towards spending, which may cause further economic problems down the line.
The Center for Responsible Lending reported that increased foreclosures of homes will cause $223 billion in losses through 2008 and 2009, trashing property values and causing losses of revenue to counties and regions that rely on property taxes to fund public services.
John Stumpf, Wells Fargo CEO, warned the industry at a Merrill Lynch banking conference that the losses from the housing market were the worst since the Great Depression, and that there was more pain ahead in 2008 as adjustable-rate mortgages begin to reset in large numbers, and homeowners fall behind in their payments.
And a Better Business Bureau/Gallup joint survey of consumer confidence found that one in five Americans, or 18 percent, felt less confident about working with businesses they dealt with on a regular basis than they once did. Among the reasons cited for declining confidence in business was the ongoing fallout from the subprime and foreclosure crises.
