DENVER--(BUSINESS WIRE)--Sept. 12, 2006--Colorado's economic
growth will slow in 2007, as a late-year recession interrupts a
five-year period of national economic expansion, according to the
"U.S. Bank 2007 Economic Forecast," prepared by Tucker Hart Adams,
Ph.D., U.S. Bank's Rocky Mountain Region chief economist.
"Consumer financial stress in the face of rising interest rates,
along with the potential for housing prices to flatten or fall are the
big threats to the Colorado economy in 2007," Adams writes in the
annual forecast. "There is a 75 percent probability that a national
recession will be underway before the end of 2007 - driven by falling
consumer spending. The onset of the Colorado recession may lag the
national contraction, pushing the worst of the state's problems into
the first half of 2008. The local recession will not be longer or feel
more severe than nationally, however, as there is nothing comparable
to the technology boom and bust of the last business cycle to make
Colorado more vulnerable than other parts of the country.
Nevertheless, the more severe the national recession, the worse the
downturn will be in Colorado."
Numerous indicators warn of the potential for disruption of a
current stable economy that could lead to the projected recession,
according to Adams' forecast. These changing factors include slowing
economic growth, accelerating inflation, rising interest rates, a
declining stock market, a softening housing market, slow recovery in
job growth and a lack in wage gains. High consumer and government
debt, future energy prices and foreign acquisition of United States
debt also are variables that could alter the balance of the economy -
currently in a stable position that has allowed for five consecutive
years of national economic expansion.
Nationally, the U.S. economy can expect a recession to occur in
the second half of the year, with annual output growth slowing to 2.1
percent, according to Adams' forecast. A 12.3 percent decline in U.S.
housing starts and a 2.4 percent drop in automobile and truck sales
are projected for 2007.
The national unemployment rate will move back above five percent,
while inflation will average 3.5 percent for the year, down slightly
from 2006 as energy prices stabilize. The 90-day Treasury bill rate
will average 4.7 percent, down slightly as the Federal Reserve cuts
interest rates in an attempt to avoid a recession, Adams' forecast
states. However, long-term interest rates will remain high. The
10-year Treasury note rate will average 5.7 percent and the 30-year
conventional mortgage interest rate will average 7.3 percent.
In Colorado, following a robust 2006 in the energy, defense and
tourism sectors, population growth will increase 1.7 percent in 2007.
Employment totals in the state will rise by 1.4 percent, or 31,842
jobs, after a 2.2 percent gain in 2006. The state unemployment rate
will increase in the second half of the year to average 4.8 percent,
according to Adams.
Adams' forecast calls for an increase in personal income of 5.3
percent in Colorado in 2007, with per capita personal income rising by
3.6 percent to $41,042. This will outpace the Metro Denver inflation
rate, providing a small improvement in the average standard of living.
Colorado housing permits will decline for the third consecutive
year, by 11.2 percent in 2007, according to Adams, as both residential
and nonresidential construction will feel the effect of higher
interest rates and an oversupply of product. Flat to declining home
prices will encourage consumers to increase personal savings, leading
to a decrease in consumer spending.
State retail sales growth will slow to 2.1 percent in 2007, as
"consumers take a hard look at their precarious financial position and
cut back on spending," according to Adams' forecast. Inflation in the
Denver and Boulder markets will average 3.2 percent, down from 3.5
percent in 2006. Oil prices will remain high for Colorado consumers,
but prices are unlikely to accelerate at the pace they maintained
during the previous two years.
When predicting the length and severity of a recession in 2007,
Adams notes, "Colorado is not facing a long, serious recession such as
we had in the last half of the 1980s. However, if inflation and
interest rates are higher than we project, consumer spending will fall
further than in the forecast and the recession will worsen."
U.S. Bancorp (NYSE:USB), with assets of $213 billion, is the 6th
largest financial services holding company in the United States. The
company operates 2,434 banking offices and 4,966 ATMs in 24 states,
and provides a comprehensive line of banking, brokerage, insurance,
investment, mortgage, trust and payment services products to
consumers, businesses and institutions. U.S. Bancorp is the parent
company of U.S. Bank. Visit U.S. Bancorp on the web at www.usbank.com.
The economic forecast will be published on www.ColoradoEconomy.com
at 8 a.m. MT Tuesday, Sept. 12.
Interviews are available with Tucker Hart Adams beginning at 9:30
a.m. MT today.
CONTACT: U.S. Bank Economist
Tucker Hart Adams, Ph.D., 303-585-5060 Direct
Adrina Angel, 303-585-4126 Direct
SOURCE: U.S. Bank