Global Insight Chief Economist Nariman Behravesh this morning said the risks of a recession in the United States are real and potentially damaging to the automotive market going forward.
"Consumer spending will slow," he said, predicting a recovery in mid-2008 at the earliest.
Behravesh, making his comments at Global Insight's Global Automotive Conference in Dearborn today, said he expects the Federal Reserve to cut interest rates two more times to revive the economy and help prevent a recession.
Still, he pegged the risk of a recession at one out of three and believes the value of the U.S. dollar will continue to fall.
He said the "epicenter" of the problem remains low-quality home loans, which were largely unloaded on overseas banks.
This is the worst housing market since the 1982 recession, which was the worst since the Great Depression, he said.
While the auto-market fallout of the problem is largely limited to the United States, he also believes the worldwide auto industry is in for a downturn after a recent boom period.
"We may be at or close to a cyclical peak for the global automotive industry," Behravesh told a crowd of about 200 auto industry insiders.
BY SARAH A. WEBSTER