Conference Board Says Housing Correction Ending

Washington, DC, February 22, 2008--The Conference Board said that despite continuing problems in the housing and financial markets, a U.S. recession is not imminent.

The Conference Board is a business research organization for executives.

"While the correction in the financial sector is just beginning, the correction in the housing sector is nearly over," said Conference Board Chief Economist Gail D. Fosler. Her analysis appears in StraightTalk, a newsletter.

Although the U.S. economy has weakened, Fosler says business activity and corporate profits continue to rise. Consumer spending is continuing at a rate of 2 to 2.5 percent a year, and with the exception of the auto industry, the economy is showing gains virtually across the board.

"Exports are booming and imports and import penetration are down," says Fosler. "While there is continuing uncertainty about the economic outlook, economic shocks from the contracting financial sector are not enough to tip the U.S. economy into recession."

The last deep recession in the U.S. economy began in 1990.

"Similarities between the current situation and the period leading up to the 1990 recession are striking, but there are also many differences," said Fosler. "The business sector today is fundamentally stronger than at any time since the 1960s, and booming exports are helping support solid and continued structural productivity gains. Also, the policy sector is moving to establish a solid floor of tax and interest rate cuts to support the economy."

Fosler's says housing will likely subtract only about 0.4 percentage points from 2008 GDP. Housing affordability is beginning to improve, she says, and with the recent interest rate cuts and home price declines, it should improve further and limit the downside risk.

Fosler also cites favorable demographic trends, such as the rise in households is increasingly outpacing the rise in permits.

The housing boom of the last 15 years has increased home ownership rate from 64 percent to a high of 69 percent in 2004, reflecting an intrinsic demand for housing, she said.

According to the report, the business sector, outside of the financial sector, remains strong and it is benefiting from the export boom, which are rising at an annual rate of 13 percent.

The bad news, Fosler said, is primarily in the financial sector.