Housing Slump May Force Fed to Pare Annual U.S. Growth Estimate
26/02/2007
The U.S. may be saddled with more sluggish growth than the Federal Reserve expects as the economy struggles to shake off a lingering hangover from the housing bubble.
``We're in the midst of a classic boom-bust credit cycle in housing,'' says Andy Laperriere, managing director at International Strategy & Investment Group in Washington. ``And the bust is just beginning.''
The worst case: Distress already evident in the riskiest part of the mortgage-lending industry turns into a full-scale credit crunch that cripples the housing market and the economy.
More likely, say forecasters at ISI, UBS AG and Deutsche Bank AG, is an economy stuck at about a 2 percent growth rate in coming quarters, down from 3.4 percent in 2006, as housing demand remains in the doldrums.
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Bloomberg