New UCLA Anderson Forecast Sees Weakness

In its first quarterly report of 2007, the UCLA Anderson Forecast remains steadfast in its belief that the national economy does not face recession, though the group's economists concede that length of the current, below trend growth period leaves them "increasingly nervous." The Forecast in particular notes that, "The credit crunch in the subprime mortgage market will likely trigger a second leg down in the housing market in terms of output and prices."

In his National report, UCLA Anderson Forecast Senior Economist David Shulman remains consistent with the story the Forecast has been telling for some time, that a recession is not imminent for the U.S. economy. However, Shulman concedes that the period of below average growth will last longer than previously believed before the economy returns to normal.

Shulman's report titled, "A Long Runway for the Soft Landing," delves into the credit crunch in subprime mortgages and the impact it will have on weakness already evident in the housing market. He writes, "For a housing market that has already witnessed starts decline by 36 percent, this is not good news. We previously had thought that housing starts would bottom in the 1.4-1.5 million range; we now think the bottom could be around 1.2-1.3 million units with the risks still on the down side. Moreover, the recent weakness we have experienced in home prices will likely tend to accelerate with the nationwide peak to trough declines ranging from 5-10 percent."