WASHINGTON (AP) -- The painful collapse of the housing market along with the credit crunch will weigh down economic growth in the final three months of this year and cause economic activity to lag in 2008.

It all means that the risk of a recession has increased, economic forecasters say.
The latest look-ahead from the National Association for Business Economics says the gross domestic product is on track to expand at just a 1.5 percent pace from October through December. If that proves correct, it would mark a sizable decline from the July-September rate of 3.9 percent.
The group's new fourth-quarter projection compared with September's prediction of a 2.5 percent growth rate. The GDP — the value of all goods and services produced in the United States is considered the best barometer of the country's economic fitness.
For all of this year, the forecasters expect the economy to grow by 2.1 percent, which would be the weakest showing since 2002. Back then, the economy was emerging from a recession and grew by just 1.6 percent.
The association downgraded its growth forecast for next year — putting it at 2.5 percent, compared with an earlier projection of 2.8 percent.
Higher risk
""While the U.S. economy faces a higher risk of recession from credit markets, housing and energy prices, NABE's panelists still do not see recession as the most likely outcome,"" said Ellen Hughes-Cromwick, the group's president and chief economist at Ford Motor Co.
Federal Reserve Chairman Ben Bernanke, in a recent congressional appearance, put Wall Street, Main Street and politicians on notice that the economy was in for period of lethargy/ He said economic growth would ""slow noticeably"" in the final quarter of this year and was seen as ""remaining sluggish"" during the first part of 2008.
In the NABE survey, about three-fifths of the forecasters put the odds of recession starting over the next year at less than one-in-three. About one-in-five sees the risk at greater than 50 percent.
""Spillovers from housing weakness to broader consumer spending, along with credit-market tightening, are seen as the most likely recession triggers,"" the report said.
By a rough rule of thumb, a recession occurs if there are two consecutive quarters when the economy shrinks. The National Bureau of Economic Research, the recognized arbiters for dating recessions, uses a more complicated formula that takes into account such factors as employment and income growth. At present the overriding worry is that consumers will cut back sharply, sending the economy into a tailspin. The danger is that the severe housing slump, weaker home values and harder-to-get credit, and other problems could spook consumers.
The Fed lowered a key interest rate in September by one-half of a percentage point, the first cut in more than four years. The Fed followed with a quarter-point cut in late October, lowering the key rate to 4.5 percent.