The US economic growth is all set to slow down during the first half of 2008, as the possibility of a recession is increasingly becoming likely. This has been the projection made by a large number of economists surveyed by Blue Chip. The US economy is expected to grow at a rate of 0.1 percent in the first quarter and by 0.5 percent in the second quarter.

The economy as a whole is expected to grow by 1.5 percent in 2008 that is more than one percentage point lower than the growth rate predicted last September. Industrial production growth rate will be a mere 1.0 percent this year with the housing industry facing the worst ever slump since 1959. Rise in international crude prices will fuel inflationary forces with projected 1.5 percent rise in annual inflation. The dismal economic performance will culminate to lower consumer spending that would further pull down the economic growth rate. The US citizens are increasingly becoming weary of their job security on the face of rising unemployment. In February 63,000 people lost their jobs as builders and manufacturers are firing more and more workers.

The multibillion-dollar fiscal spending package with tax rebates is not expected to provide any stimuli to the US economic growth. Heavy debt, inflation pressures, rapidly declining home prices and fear of job security will force consumers to use the tax rebates to increase their savings and clear debts. The only silver lining is the positive impact that a weakening US dollar will have on narrowing trade deficit. For the first time in five years, US trade deficit fell to $711.6 billion last year from $758.5 billion in 2006. However, Wall Street economists surveyed by Thomson /IFR predict that higher level of oil imports at higher prices is expected to cause slight increase in the trade deficit.

Source: Yahoo
Image: NY Mag