Slowdown in 2006?

The US economy is expected to slow in 2006, according to this Reuters report.

U.S. economic growth could soften in 2006 but inflation should decline and the jobless rate drift lower as well, according to participants at a Federal Reserve Bank of Chicago conference released on Monday.

Real gross domestic product growth was forecast at 3.2 percent, down from a projected 3.6 percent this year, as the rate of consumer spending levels off.

Yesterday's ISM report on the US services sector did show some slowdown.

The pace of growth in the U.S. service sector eased slightly more than expected in November, with prices paid decreasing and employment picking up, a report published on Monday showed.

The Institute for Supply Management's services index eased to 58.5 in November from 60.0 in October, just below Wall Street's median forecast of 59.0.

But in Europe, services accelerated, according to this Bloomberg report.

Service industries such as banks and airlines, one-third of the euro-region economy, expanded in November at the fastest pace in 16 months as higher earnings lifted European growth.

A CIPS/RBS index of growth in services rose to 55.2, the highest since July 2004, from October's 54.9, a statement today by Edinburgh-based Royal Bank of Scotland Group Plc, the survey's sponsor, showed...

A level of 54.7 was forecast, according to the median estimate in a survey of 32 economists.

In the UK, though, the services sector slowed, according to the same report.

Expansion of U.K. services slowed in November. The RBS index today fell to 55.8, from 56.1 in October. The result was lower than the median forecast of 56 in a Bloomberg survey of 23 economists.

In line with these data, Euro-zone officials are hopeful about growth:

Finance ministers from the 12 countries that use the euro said Monday that the European Central Bank's decision to raise interest rates last week would not hurt Europe's recovery.

"We were unanimous in saying that growth is taking shape in the euro-zone and will carry on at a steady rate," Luxembourg Prime Minister Jean-Claude Juncker told reporters.

...but the UK has had to downgrade its growth forecast:

British Treasury chief Gordon Brown lowered his forecast for domestic economic expansion on Monday to 1.75 percent for the year, marking the slowest growth since 1992...

Brown said that GDP growth would rise to 2 percent to 2.5 percent next year and 2.75 percent to 3.25 percent in the following two years.

There are more economic forecasts at Morgan Stanley, with Stephen Roach providing global forecasts:

Our first cut at 2007 calls for a 3.8% increase in world GDP growth -- down slightly from an upwardly revised 4.1% increase for 2006 (versus our previous estimate of 3.8%)...we are forecasting industrial world CPI increases averaging just 2.0% over 2006-07...

Within the developed world, a slowing in European growth is most pronounced (downshifting from 2.2% in 2006 to 1.8% in 2007), whereas we have penciled in more modest downshifts to trend-like outcomes in the US (from 3.8% in 2006 to 3.5% in 2007) and Japan (from 2.5% in 2006 to 2.3% in 2007). In the developing world, the biggest shift is an upgrade to our 2006 Chinese growth forecast from 6.7% to 7.8%... Our first cut at 2007 calls for a further moderation in Chinese economic growth to 7.5%. We also look for growth in India to slow somewhat to an average of 6.6% over the 2006-07 interval... Elsewhere in the developing world -- Asia, Latin America, and Emerging Europe -- we see growth in 2006-07 averaging close to the above-trend 2005 pace.

More detailed forecasts for the US economy are provided by Richard Berner and David Greenlaw.