ATLANTA — If the U.S. economy does dip into recession, the downturn should be short, according to economists at the International Builders' Show.
"The numbers seem to be holding their own right now, during this period of turmoil out there," said David Seiders, chief economist of the National Association of Home Builders.
The trade group predicts housing starts will decline 5-6 percent this year, to 1.52 million.
The "R" word was on the lips of many of the 70,000-plus builders and suppliers who jammed Atlanta's Georgia World Congress Center for the trade show, held Feb. 9-12.
The closely watched construction industry has generated about 20 percent annual growth in recent years. Construction ranks as the second-largest market for plastics, after packaging. Home building and remodeling gobble up products such as vinyl siding, windows, pipe, appliances and hot tubs.
This year, housing starts are expected to decline. But the economists in Atlanta listed several "cushions" that should save home construction — and the overall economy — from a free fall. Inflation remains low, which frees the Federal Reserve Board to keep cutting interest rates. Also, the government has the luxury of a budget surplus it can tap to juice things up.
In January, the Fed cut interest rates by a full percentage point. NAHB expects the Fed to slash another full point by mid-May.
"The Fed has, in essence, rushed in," Seiders said.
But since it takes months for rate cuts to help revive a flagging economy, many economists are saying a recovery will not happen until the second half of 2001.
NAHB's forecast of a modest decline in housing starts assumes the economy narrowly avoids a recession, the Fed makes the additional full-point cut and Congress passes the major tax-cut bill being pushed by President Bush.
NAHB thinks home building will bounce back again in 2002, growing 3 percent, to 1.56 million starts.
Remodeling will be flat, declining by a half percent this year, before rebounding in 2002, according to the Washington-based trade group.
David Wyss, chief economist at Standard & Poor's in New York, was less optimistic than Seiders. He predicts 2001 housing starts will sink 8 percent, to 1.47 million units, or around the same level as 1997.
"That's a drop, but let's face it, by the standards of a couple of years ago, it's still a great year," Wyss said.
The big question remains consumer confidence, economists said in Atlanta. Seiders said confidence plummeted in December, when big companies announced mass layoffs.
"Something, in a sense, kind of broke in terms of people's views of the world," he said.
Wyss, who puts the odds of a recession at 35-40 percent, said the last time consumers were this gloomy was in the last recession, in 1991.
"When consumers are scared, they tend to curl up into a little ball somewhere and not spend any money. They certainly don't go out and buy a house," he said.
David Berson of Fannie Mae, the Federal National Mortgage Association in Washington, thinks there is a 30-35 percent chance of a recession, which would be "short and mild."
On a positive note, a refinancing binge will pump $50 billion into the economy this year, according to Berson, vice president and chief economist at Fannie Mae.
"That may be enough to keep us out of a recession," he said.
If a recession does hit, interest on fixed-rate mortgages could drop to 6 percent or below, Berson said. "We could just see an incredible volume of mortgage refinancing," he said.