The Conference Board is expecting the U.S. economy to weaken during the second half of 2006 and throughout 2007, as rising interest rates and high energy prices take a toll on the housing market and consumer
spending.

The Conference Board’s predictions have been published in its U.S. Outlook – Summer 2006.

“Consumer spending in the United States barely flinched as energy prices
tripled in recent years, but the party is expected to wind down,” says Kip
Beckman, principal research associate. “High energy prices and the rising cost
of borrowing mean that households will have less disposable income to spend.”

A strong first-quarter performance will bolster overall growth in real gross domestic product, expected to reach 3.4 per cent in 2006. Next year, real GDP growth is forecast to weaken to 2.7 per cent.

Solid growth in business investment spending will keep the economy expanding in the near term, but housing activity is quickly stalling. Although the forecast assumes that
the housing market will decline gradually, the risk for the industry of a hard landing is growing. The other risk is that oil prices would creep up to US$80 per barrel, instead of easing gradually as forecast.