Recession is unlikely, top economist says

Consumers are becoming more cautious about
spending.

By KATHERINE YUNG

DETROIT FREE PRESS

DETROIT — The University of Michigan’s top economic forecaster has predicted only a 25 percent to 30 percent chance of a national recession, but warned that auto sales would remain relatively weak next year before rebounding in 2009.

“I don’t think that a recession is very likely,” Saul Hymans said during the 55th Economic Outlook Conference held at the school.

However, Hymans is forecasting another tough sales year for the auto industry in 2008.

Automakers should sell about 16 million light vehicles next year, the lowest level since the 15.5 million cars and light trucks sold in 1998, he said.

That’s down slightly from sales of 16.1 million light vehicles expected this year and a significant decline from the 16.5 million sold in 2006.

Yet Hymans predicts sales will recover in 2009, rising to 16.3 million light vehicles.

In the meantime, though, consumers battling higher gas and food prices and the sharp drop in home values are becoming more cautious about spending.

Richard Curtin, director of the university’s Surveys of Consumers, predicts personal consumption expenditures will increase only 2.25 percent in 2008, well below the 3.6 percent average of the past 10 years.

But next year also could see some positive events. The national downturn in home-building may bottom out by the middle of next year, Hymans said.

And rising exports, aided by a weak U.S. dollar, should help the national economy grow at a faster rate.