The US economy will grow 4.3 percent this year as business spending improves and payrolls expand, but a recession could be around the corner if rising interest rates hammer the housing market, according to a widely watched forecast.
The latest outlook released on Tuesday by the UCLA Anderson Forecast for gross domestic product growth this year was slightly better than its projected 4.1 percent in March, but the strong pace masks concerns about factors driving growth, said economist Edward Leamer.
While many analysts expect rising productivity to continue fuelling strong growth, the director of the UCLA Anderson Forecast said the economy may be feeling the "final ripple effect" of the Internet boom.
Once it passes, growth will return to a historical average of 3.1 percent per quarter, said Leamer, one of the first economists to flag the most recent recession. For 2005, Leamer expects 3.2 percent growth, followed by 3.3 percent in 2006.
"I think it's a return to normal and that the productivity point is still open," Leamer said.
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