Pessimistic Projection: Several Quarters Of U.S. Slowdown

Despite some recent signs of strength in the U.S. economy, Merrill Lynch & Co. economists remain pessimistic. They figure inflation-adjusted GDP growth slowed to an annual rate of 2.8% in the second quarter of this year after a moderately strong 3.8% rate in the first quarter. The slowdown, they claim, "will frame the economic outlook for the next several quarters."(The U.S. Commerce Department's initial reading of second-quarter GDP growth is slated to be released on Friday, July 29.)

However, the "r" word is not in the Merrill economists' forecast. Unless Chairman Alan Greenspan and his colleagues on the Federal Open Market Committee raise the federal funds target rate to 4% -- it's now at 3.25% -- "we do not foresee much danger of the economy falling into recession," they say.

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