Caution is the word for economic forecast

The economic outlook for next year, in a word: caution.Paul L. Kasriel, senior vice president for economic research at The Northern Trust in Chicago, delivered his assessment Thursday night to guests of Beloit's First National Bank and Trust Company. Kasriel, who is responsible for Northern's economic and interest rate forecasts, is highly respected nationally for his insights. He is a lecturer in finance at Northwestern University's Graduate School of Management.Kasriel told the group, “We are entering a period of greater risk for the economy,” and predicted the second half of 2006 will experience a significant economic slowdown. While not predicting a recession, Kasriel said he expects economic growth to slow below 3 percent.

In fact, he said, “leading indicators now suggest the economy is already in the process of slowing down ... As we go forward in this quarter we're going to be lucky to see any growth in consumer spending.”The most vulnerable segments of the economy in the next year are likely to be residential real estate and discretionary consumer spending. With interest rates rising, the adjustable rate mortgages which made housing more affordable will be especially sensitive, Kasriel said.