Recession Unlikely, Economists Say

Bloomberg News DAVOS, Switzerland — A full-blown recession isn’t in the cards for the United States, though the world’s growth engine will sputter a bit in the next few months, investment bankers and economists said.

There will be “no recession, and the transition will be relatively quick,” said Jacob A. Frenkel, chairman of Merrill Lynch & Co.’s sovereign advisory group.

The annual growth rate in the United States, which accounts for about 25% of the global economy, slowed from 5.6% in the second quarter to 2.2% in the third. Most economists expect fourth-quarter growth to match the pace of the previous quarter, though some worry the economy is contracting already.

The risks of a worsening slowdown prompted the Fed on Jan. 3 to cut its benchmark rate a half-percentage point, to 6%.

Mr. Frenkel and Alan Blinder, an economics professor at Princeton University, told a panel on the opening day of the World Economic Forum’s annual meetings that the United States is undergoing a necessary slowdown from “unsustainable growth.”

Deputy press secretary Mary Ellen Countryman said the Bush administration is focused on “getting up and going,” and did not send a representative to this year’s meetings. “Next year we promise to attend.”

In the panel discussion, Mr. Frenkel said the forces that produced the U.S. economy’s longest expansion on record, such as advances in information technology and economic deregulation, are “for real.” Structural changes in Europe and more open Latin American economies, are also here to stay, he said.

Mr. Blinder, a former vice chairman of the Federal Reserve, said one of the reasons the slowdown in the United States may feel like a recession is because “a slowdown of that magnitude often puts you in recession.” He put the probability of a recession at one-third.

The slowdown in the U.S. growth rate will shave 0.75 to 1 percentage point off the world expansion this year, Mr. Blinder said. That assumes that other regions do not slow as a result of weaker U.S. growth. Panelists said that is unlikely, since weaker U.S. demand curtails foreign imports, which suggests Europe is not immune to slowdown either.