U.S. economists have reduced their predictions for 2008 economic growth for a third consecutive month, saying the housing slump will be deeper and last longer than previously expected, according to a survey released Wednesday. The consensus of economists surveyed by the Blue Chip Economic Indicators newsletter forecasts the U.S. economy expanding 2.4 percent in 2008, down from a 2.6 percent projection made last month and a 2.8 percent gain forecast in August. The downturn in housing will increase the likelihood of lower consumer spending and business investment, the monthly newsletter said. Consumer spending accounts for two-thirds of total U.S. economic activity. Despite the downward revisions, next year's performance appears to be slightly stronger than this year's. The panel of 52 economists expects growth of only 2 percent this year, a forecast that has held steady for three consecutive months. While growth is seen to improve next year, the economists expect housing starts to drop to their lowest level since 1993 and believe consumer spending will record its smallest gain since 1991. Regarding this year's performance, the effects on the economy from the weak housing sector are expected to worsen during the second half of the year, and many economists expect home prices to record their first year-to-year decline since the 1930s. High inventories of unsold homes, tighter lending standards, and falling home prices suggest the housing sector will remain weak through 2008, the newsletter said.
