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US economy's gloom expected to begin lifting by late '09

Until then, employment, output, and housing prices will keep falling.

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The economic storm that has engulfed the United States – and the world – is expected to continue for most of 2009.

If there is a silver lining, it is that as the year progresses, economists expect the rate of decline in the economy to start to slow – with some modest growth possible by the last quarter of the year.

Before the skies brighten, however, unemployment will rise, business bankruptcies will accelerate, housing prices will continue to fall, and consumer confidence will remain low, according to most forecasts.

"It's a struggle to say there is an upbeat outlook," says Richard DeKaser, Washington-based chief economist at National City Corp. "We would not call the forecast for 2009 optimistic."

Indeed, the worst of the economic news may be just arriving, economists say. Consumer spending for the holidays will be the worst in years, even with all the store promotions. Stores will continue to offer bargains into 2009 in a desperate attempt to unload inventory. Weak consumer spending will be one of the major reasons the economy as measured by the gross domestic product (GDP) will shrink by as much as 4 to 6 percent on an annualized basis in the fourth quarter.

Lagging economic growth at year-end is not a good sign for the New Year. "You try to get a push off into the next year, and if you don't, it sets the tone," says Dan Meckstroth, chief economist at Manufacturers Alliance/MAPI in Arlington, Va.

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