WASHINGTON -
The Credit Union Economics Group (CUEG) said corrections in the housing market and rising energy prices has led it to lower its expectations for the economy, and noted its collective outlook for overall economic growth, as measured by real gross domestic product, has been reduced from previous forecasts for both final 2007 and 2008. CUEG said it also sees employment growth continuing to slow with the unemployment rate averaging 5% in 2008.
CUEG added that some of the ARM-reset pressures may be eased by last week's decision by the Fed to cut key interest rates, but overall tightening of credit conditions combined with slower employment and economic growth in 2008 will challenge consumers.
"We are clearly in a correction phase of this economic expansion," said Dave Colby, chief economist for CUNA Mutual Group. "While our forecast does not indicate a recession in 2008, the chances of economic downturn have increased significantly over the past six months. I would put recession possibilities in the 35% to 40% range, and rising. Consumers are becoming decidedly more cautious with respect to big-ticket spending and taking on new debt obligations."
While CUEG is expecting slower loan growth, it boosted its 2008 share growth outlook was boosted by 110 basis points to 6.4%.
For more info: www.cueg.org.
