WASHINGTON (Reuters) - The U.S. economy will likely slip into a recession by the end of the year, but the woes in the housing market are close to bottoming out, the top economist for a leading U.S. business group said on Thursday.
“I see possibly a recession by the end of the year, but it will be a relatively short recession and a relatively mild recession,” said Martin Regalia, vice president for economic policy at the U.S. Chamber of Commerce.
He also said the government’s economic stimulus package helped head off a recession during the second and third quarters of this year, but that a second such package would not be worthwhile.
“Some of the problems in the economy are a little more fundamental than consumption,” Regalia told reporters in a briefing.
Congress passed the $152 billion stimulus package in February, sending checks directly to thousands of Americans in an attempt to spur the economy and help those hurt by the economic slowdown.
Democrats have discussed passing another emergency spending bill, but the movement has not gotten much traction.
Revised numbers released on Thursday showed consumer spending, supported by the stimulus package and strong exports, pushed the economy ahead at a solid 3.3 percent annual rate in the second quarter. That was much stronger than the prior assessment of a 1.9 percent gain.
Regalia said he expects moderate third-quarter growth, at a 1 percent annual rate, and zero or slightly negative growth in the fourth quarter.
Regarding housing, Regalia said he was encouraged by data this week showing a quarter-over-quarter increase in home sales and a decrease in the rate home prices are declining.
“I believe we’re starting to see a little bit of hope, but I don’t believe we’ve bottomed out even yet,” he said. “We’re approaching the bottom.”
Turning to tax policy, Regalia said the Chamber believes increasing taxes would further restrict economic growth. The Chamber supports Republican presidential candidate John McCain’s suggestion to make Bush administration tax cuts permanent.
It also supports lowering overall corporate tax rates and is against policies that tax corporate dividends or try to improve income distribution by placing even higher tax rates on the wealthy.
Regalia added that there are not many good options to speed up an economic recovery, which he predicts will happen in the second quarter of 2009.
“I think we’re in for a rough road over the next couple quarters, and I don’t think we can do much in the short run,” he said.
Reporting by Karey Wutkowski; Editing by Dan Grebler
Our Standards: The Thomson Reuters Trust Principles.