Economy Crawls, Raising Recession Fears
ASHINGTON (AP) -- The worst economic growth in four years is raising concern that troubles in the U.S. housing market will spread and throw the country into a recession before the year is out.
The economy practically crawled at a 1.3 percent pace in the opening quarter of 2007, the Commerce Department reported Friday. That was even weaker than the sluggish 2.5 percent rate in the closing quarter of last year.
The main culprit in the slowdown: the housing slump, which made some businesses act cautiously. The bloated trade deficit also played a role.
Consumers largely carried the economy in the first quarter. But will they stay resilient in light of the troubled housing market, fallout from risky mortgages and rising energy prices?
"The No. 1 question is can the consumer continue to play Atlas while the housing market crumbles around him?" said Richard Yamarone, economist at Argus Research. Others worry about businesses' appetite to spend and invest -- also important ingredients for a healthy economy.
Friday's report brought some of these uncertainties to the fore. For now, though, economists believe the risk of a recession is low. Former Federal Reserve Chairman Alan Greenspan has put the chance of a recession this year at one in three.
Federal Reserve Chairman Ben Bernanke, however, has said he doesn't believe the economic expansion, now in its sixth year, is in danger of fizzling out. Neither does the Bush administration.
