WASHINGTON, May 21: Leading US business economists have cut their growth outlook for the US economy in 2007 amid a sharp downturn in housing, but see a rebound in 2008, a survey showed on Monday.

The survey of 48 economic forecasters of the National Association of Business Economists (NABE) showed an average forecast of 2.3 per cent growth for the full year of 2007, down from 2.8 per cent in a similar poll in February.

“Residential investment remains a dominant force dampening growth in 2007,”the NABE said.

“Nearly half of our forecasters think that the bottom in housing will not be reached until the fourth quarter of 2007 or later. Most respondents think that median home prices will decline this year, though the estimated drop is generally expected to be 3.0 per cent or less.”

The latest forecasts came after the US government revised down its estimate of gross domestic product (GDP) growth for the first quarter to a 1.3pc pace, and other data suggesting the figure may be cut even further.

The NABE economists also reduced the forecasts for business fixed investment and inventory accumulation. But on the positive side, they said consumer spending -- which represents two-thirds of economic activity -- should remain strong with 3.2 per cent growth.

As a result, the panel “affirmed an expectation of stronger growth next year,” NABE said, noting that the average forecast for the full year of 2008 was 3.1 per cent, reflecting a rebound in investment spending and inventories, along with an end to the housing correction.

“Results for the first portion of the year indicate that the expansion has descended from its cruising altitude,” said Carl Tannenbaum, NABE president and chief economist at LaSalle Bank/ ABN Amro. “However, the NABE forecast panel expects economic growth to overcome recent turbulence and return to greater heights over the coming year.”

The business economists saw only a remote chance of a recession in 2007: over half the panel forecasts at least a 25 per cent chance of a recession getting underway but fewer than one in four economists saw the risk greater than one-third.

The panel said GDP growth may be getting some benefit from the weaker dollar, which is expected to boost exports and, as a result, economic growth.

The slower growth pace is likely to have only a limited impact on the labour market. NABE’s panel called for an increase in private employment of 1.3 per cent this year, which would equate to 1.5 million new positions.

But inflation may be hotter than earlier estimates, NABE said. The forecast of 2007 headline inflation increased dramatically to 2.9 percent for 2007, largely due to higher energy costs, especially for motor fuel. But “core” inflation, which excludes food and energy, was seen at just 2.1 per cent.—AFP