(Corrects typographical error in 16th paragraph)

April 3 (Bloomberg) -- The resilience of the U.S. economy in the face of a devastated housing sector and a financial crisis is amazing. The severe recession some have predicted is still nowhere in sight.

The odds are at least 50-50 that the current period of economic weakness won't be labeled as even a mild recession.

Federal Reserve Chairman said as much yesterday in testimony before Congress's Joint Economic Committee.

``It now appears likely that real gross domestic product (GDP) will not grow much, if at all, over the first half of 2008 and could even contract slightly,'' Bernanke testified.

Even if there was a slight contraction, Bernanke said in response to a question, ``That doesn't necessarily mean there's a recession, because it would depend on the circumstances.''

His careful wording suggests he and other Fed officials think weak positive growth is a bit more likely than a slight contraction and clearly indicates they don't see a deep slump.

``We expect economic activity to strengthen in the second half of the year, in part as the result of stimulative monetary and fiscal policies,'' he said, adding that they think the economy will do still better in 2009.

That forecast is in line with those of a number of private economists.

``Somewhat surprisingly, outside the U.S. mortgage market and housing sector, we find relatively little indication of a significant negative financial shock to the real economy at this point in time,'' economists at Deutsche Bank AG told clients in a March 31 memo.

Distress Easing

``The relatively good health of the real economy is likely to reflect to a significant degree the strong medicine dished out over the last months by central banks and governments,'' they said.

Economist Mickey Levy of Banc America Securities has reached the same conclusion.

``Add up the data and GDP is about flat,'' Levy said in an April 1 interview. ``The reason we are not contracting hard is because outside of housing, businesses came into this situation with very lean inventories and employment and the capital stock are not significantly out of kilter with respect to output.''

There are indications that some of the financial market distress may be easing.

On April 1, Lehman Brothers Holdings Inc., the fourth- largest U.S. securities firm, saw its stock price soar after it raised $4 billion with an oversubscribed sale of convertible preferred shares.

Credit Available

The same day, UBS AG, the world's largest money manager, announced it would sell a rights offering to raise almost $15 billion to replenish its capital after huge losses on assets linked to subprime mortgages.

The Lehman and UBS moves triggered a stock market rally with most of the gains being retained yesterday.

In many ways it doesn't matter a great deal on which side of zero the GDP growth rates fall for the first two quarters of this year. Most U.S. recession periods have included two quarters of falling GDP.

What's important is that a cumulative down spiral in jobs, consumer spending and business investment not materialize, and few economists believe one will develop this year.

For one thing, even with the financial crisis U.S. households and businesses haven't been starved for credit, except for residential real estate and high-yield type credits, according to the Deutsche Bank economists.

The `Strains'

Because of the three percentage point reduction in the Fed's target for the overnight lending rate -- now down to 2.25 percent -- the cost of most credit hasn't gone up much, even though spreads to Treasury yields have widened a lot.

``For both U.S. households and corporations the level of financing has remained fairly stable since the financial crisis broke out,'' the Deutsche Bank economists said. ``Thus, it seems that monetary policy so far has succeeded in preventing a negative feed-back loop between the financial sector and the real economy.''

That hardly means markets are back to normal, and Bernanke noted that ``strains'' persist in a variety of areas, including commercial paper, high-yield debt, municipal bonds and mortgages too large to be eligible for purchase by Fannie Mae and Freddie Mac.

Housing Affordability

Even in the battered housing sector there are some signs of spring. Steps have been taken to expand the amount of housing credit available through Fannie and Freddie and 30-year fixed- rate mortgages are less than 6 percent. That, coupled with the drop in house prices in most markets, has improved housing affordability.

As Macroeconomic Advisers -- another forecasting firm that expects GDP growth to stay positive -- said in its Weekly Economic Commentary on March 31, ``The pace of decline for sales of new homes has moderated of late, while sales of existing homes posted a nice gain in February.''

None of the better news means the economy is out of the woods yet. As Bernanke said, ``the risks remain to the downside.''

Payroll employment may fall more, the unemployment rate probably will rise and consumer spending isn't going to be strong. Nevertheless, this isn't a replay of 1929 or Japan's lost decade of the 1990s. It may not even be a recession.

(John M. Berry is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: John M. Berry in Washington at jberry5@bloomberg.net

Last Updated: April 3, 2008 12:31 EDT