Summary: This month’s Bloomberg News survey of 82 economists indicates that the U.S. housing slowdown, categorized last week by Fed Chairman Ben S. Bernanke as a “substantial correction,” is expected to weaken the economy more than previously forecast. They expect interest rate cuts in 2007, but do not anticipate an accompanying recession. The economy is expected to grow 2.6%, after expanding 3.3% in 2006, its weakest performance since 2003. The forecast for slow growth might attract investors to U.S. Treasuries, which are offering three-week-high yields. Lower gas prices and higher incomes should ease the effects of the housing slowdown on consumers, but the expected 3% gain in consumer spending would still be shy of last decade’s 3.7% percent average quarterly increase.
Related links: No Agreement on Economy, Yet the Market Marches Higher • Goldilocks or the Wait-and-See Bears? • Economist & Traders Square Off on Housing • Mortgage Applications Don't Indicate Housing Rebound • Moody's Forecasts 3.6% Median House Price Decline in 2007 • Don't Believe Advocates of a Soft-Landing for Housing
Potentially impacted stocks and ETFs: SPDR Homebuilders (NYSEARCA:XHB), Toll Brothers (NYSE:TOL), Pulte Homes (NYSE:PHM), Beazer Homes (NYSE:BZH), Hovnanian (NYSE:HOV), MDC Holdings (NYSE:MDC), Ryland Group (NYSE:RYL)
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