Economic outlooks vary but aren’t very positive
Public, private forecasts look for weak growth ahead
By Tom Stundza -- Purchasing, 12/5/2007 1:05:00 PM
Economic concerns are seizing a top spot in the minds of business people as falling housing prices, rising gasoline prices and health-insurance worries continue. And an economic overview by Reed Construction Data says the North American economy faces the most serious challenges than at any time since the dot.com collapse in 2001. Forecasters are looking at gross domestic product (GDP) growth to slip badly this quarter to 1.5%, dropping full-year GDP growth to an estimated 2.1%, well below last year’s 2.9%.
Interestingly, in a survey released Tuesday by the Business Roundtable, the country's top corporate executives foresee pretty good business prospects ahead. The CEOs are pinning their optimism on expanded sales overseas because the weak dollar has made U.S.-made goods cheaper for offshore buyers. Meanwhile, even though the Bush administration just last week reduced its 2008 growth forecast slightly, to 2.7% from 3.1%, it also said the economy was resilient and predicted the six-year expansion would stay on track.
But not everyone agrees. Wall Street has become convinced the Federal Reserve will again lower interest rates at the Federal Open Market Committee meeting next week. That’s because the Fed has a low estimate of 2.1% economic growth in 2008. Also, many private economists are growing increasingly worried about the risk of a recession. The private economists in the closely watched Blue Chip Economic Indicators survey have predicted sluggish growth through the first half of 2008. That survey has pegged GDP (gross domestic product) growth for next year at 2.4%, below the White House forecast.
The Blue Chip panel also believes the odds of a recession are about one-in-three. And Moody’s Economy.com says that matching weakish business confidence indexes “suggest weaker factory activity is on the horizon, with the strong possibility that the index will fall below its expansionary threshold of 50 over the next few months.” Purchasing.com’s index was 50.4; the Institute of Supply Management index was 50.8.
Moody’s economist Ryan Sweet tells clients that these real-time indicators “confirm the economy is slowing abruptly,” adding that “manufacturing remains weak midway through the fourth quarter, and is unlikely to improve as final demand will likely determine the pace of factory activity” through December at least.
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