Slow growth highlights fragility; Warning of 'vicious circle' in housing sales...
Slow US growth highlights fragility

By Suzanne Kapner and Alan Rappeport in New York and Robin Harding and James Politi in Washington

Published: December 22 2010 14:23
Last updated: December 22 2010 20:01

The US economy grew slower than Wall Street analysts had expected in the third quarter, and the housing market continued to struggle, highlighting the challenges of sustaining a fragile recovery.

Analysts, who had initially forecast that 2010 would see a modest upturn in housing, are now predicting that prices will decline in 2011 by as much as 10 per cent, as a record number of distressed properties floods the market. The ongoing weakness has prompted some Wall Street economists to call for major intervention by Washington to head off prolonged stagnation.

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Richard Berner, the chief US economist at Morgan Stanley, said that without new government initiatives to reduce interest payments and principal balances, the housing market would remain locked in a “vicious circleâ€