The United States may skirt a recession, but turmoil in the housing and credit markets is likely to take a big toll on the world's richest economy and the risk of a downturn is on the rise, a series of fresh forecasts show.

Economists underestimated the damage from the housing sector, many are saying, and they now fear a growing impact from tightened credit. And though the extent of the crunch is still unknown, it will complicate any recovery.

In just a month's time a broad range of economists have lowered their outlook for next year and expect the last three months of this year will be even worse than earlier estimated.

Now, some economists say the United States is indeed headed for a recession.

A mild U.S. recession is now likely, with no growth for the year ahead, wrote Richard Berner, chief economist at Morgan Stanley in research to clients early on Monday morning.

That added to a grim outlook by the closely watched panel of economists in the Blue Chip Economic Indicators survey which said now that the odds of a recession in the next 12 months are greater than they were a month ago.

These latest forecasts, which call for growth in 2008 just slightly above 2 percent, differ greatly from the rosier 2.7 percent growth the Bush Administration is projecting for 2008.

We are forecasting solid growth for 2008, White House economic adviser Edward Lazear said after releasing its twice-year economic forecast late last month.

But Panelists surveyed by the Blue Chip Economic Indicators newsletter between December 5 and 6, now predict the economy will grow by an anemic 1.4 percent in the first quarter and by just 2.2 percent for all of next year. The odds of a recession in the next 12 months are nearly four-in-10 now, versus one-in-three a month ago.

And, while economists surveyed by the Securities Industry and Financial Markets Association believe a recession can be avoided, particularly with the Federal Reserve stepping in an cutting interest rates, they caution that the impact from tightening credit is hard to gauge.

There is something more chronic going on, said James Glassman, a senior economist at JP Morgan Chase and also vice chair of that group's economic advisory round-table.

BELOW TREND GROWTH FORECAST FOR 2008

The securities industry group consensus, which was taken between November 27 and December 3 and released also on Monday, projected that the U.S. economy is expected to grow by an anemic 2.1 percent in 2008 as it works through more deterioration in the housing and credit markets.

Major factors dampening growth are the housing sector deterioration and tight financing conditions, said Michael Decker of SIFMA.

Along with crucial consumer spending, growth in business capital spending is expected to be slightly lower than the 2007. But business spending will continue to benefit from generally solid corporate balance sheets and cash balances accumulated during the recent period of strong corporate profits, the securities industry survey said.

Based on Blue Chip's latest forecast, real GDP growth will be a near-stalled 0.8 percent in the final three months of this year, down from 0.9 percent forecast a month ago.

On a year-to-year basis, Blue Chip now forecasts the economy to expand at a below-trend rate of 2.2 percent both this year and next.

Also cut were consensus estimates of 2008 growth in corporate profits and nonresidential fixed investments.

Real nonresidential fixed business investment is now projected to increase 4.3 percent in 2008, 0.2 of a point less than a month ago, according to the Blue Chip survey.

The SIFMA forecast showed business capital investment slipping from 4.6 percent in 2007 to 4.4 percent in 2008, because of weaker consumer demand, expectations for weaker global growth and uncertain borrowing conditions.

The view of the panel that we avert a recession is largely because we see the Fed taking appropriate policy responses along the way, said David Resler who chairs the SIFMA round-table is chief economist at Nomura Securities.

Those panelists in the SIFMA forecast are expecting that by mid-year the Federal Reserve's target Fed-Fund rate will be cut to 3.5 percent from its current 4.25 percent.

Most economists are expecting the central bank to reduce rates, when policy makers meet on Tuesday, to cut rates by 25 basis points.

We've seen a lot more negative news on the housing sector, shattering any hope that this housing recession would be over in 2007, said Resler. I think most of us would concede that the risks of a recession are non-trivial, but most of us have been impressed with the economy's resilience and are reluctant to forecast a recession,

(Reporting By Joanne Morrison; Editing by Richard Satran)

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