Dec. 11 (Bloomberg) -- Economic growth in the U.S. weakened this quarter, and the slowdown will carry into the first half of 2007 as a pullback in manufacturing adds to the effect of the slump in housing, a Bloomberg News survey showed.

The economy will grow at an annual rate of 2 percent this quarter and will expand at a 2.4 percent pace in the first three months of next year, according to the median forecast of 80 economists surveyed from Dec. 1 through Dec. 8. Both estimates are down from the previous month's survey.

A report this month showed manufacturing contracted for the first time in more than three years in November as automakers trimmed production and inventories piled up, suggesting the economic slowdown is spreading beyond housing. Still, job and income growth will be strong enough to keep consumers spending and the economy growing, allowing the Federal Reserve to hold rates steady through March, economists said.

``Fallout from the housing and auto downturns is too limited to support recession scenarios, but we are more pessimistic for the immediate future,'' said Nigel Gault, director of U.S. research at Global Insight Inc. in Boston. ``The Fed should be able to help next year by cutting interest rates, but inflation is still running above its comfort zone, keeping the Fed cautious for now.''

The fourth-quarter estimate compares with a 2.5 percent median forecast in the previous month's survey. The forecast of 2.4 percent growth in the first quarter is down from the 2.6 percent forecast last month. Economists trimmed second-quarter forecasts by two-tenths of a percentage point, to 2.5 percent.

Third-Quarter Growth

The economy grew at a 2.2 percent rate in the third quarter, dragged down by the biggest decline in homebuilding in 15 years. The economy expanded at a 4.1 percent average rate in the first half.

Reports this month showed the slide in housing may be deepening. Construction spending in the U.S. fell by the most in five years in October, led by a plunge in home-building, the Commerce Department said Dec. 1. Sales of new homes fell more than economists expected that month.

Slowing demand has left some companies with excess inventories, causing many to throttle back on production as they sell from existing stockpiles.

Inventories Increase

Inventories at U.S. wholesalers piled up at a faster pace in October as sales declined for a second month, a government report showed today. Inventories increased 0.8 percent in October while sales fell 0.5 percent, the Commerce Department said in Washington.

``There is going to be a slowdown in economic growth in the United States in 2007, no question,'' Caterpillar Inc. Chief Executive James Owens said in a Dec. 7 speech. ``Probably for the first time in the last 15 years, the U.S. is going to grow slower than most of the rest of the world.''

Peoria, Illinois-based Caterpillar is the world's biggest maker of earthmoving equipment.

Ford Motor Co., the second-largest U.S. automaker, cut 15,000 more vehicles from its North American production plan for this quarter after reporting a decline in November U.S. sales.

Slowing growth may help ease inflation pressures. Consumer prices will rise 2.2 percent this year, down from a prior estimate of 2.5 percent. Economists forecast prices will rise 2.4 percent next year, unchanged from the previous forecast.

Consumer Sentiment

The slumping real estate market and the economic slowdown are weighing on consumer sentiment. Confidence among U.S. consumers declined in December from close to a 15-month high the prior month, according to a report last week from the University of Michigan.

``There's been pretty negative news on the economy in recent weeks that may have put a dent in consumer confidence,'' said Ethan Harris, chief U.S. economist at Lehman Brothers Holdings Inc. in New York.

Consumer spending remains a bright spot. Low unemployment and rising incomes will help consumers sustain the spending that makes up two-thirds of the economy, keeping economic growth from faltering, economists said.

Spending is forecast to expand 3 percent this quarter, unchanged from the previous estimate, according to the Bloomberg survey. First-quarter spending will grow at a 2.7 percent rate and will average 2.8 percent in 2007.

Hiring ``puts a floor under growth,'' said Nariman Behravesh, chief economist at Global Insight Inc. in Lexington, Massachusetts. ``It prevents things from getting worse.''

Workers' average hourly earnings in November rose 0.2 percent, or 3 cents, after rising 0.4 percent the previous month, a report from the Labor Department showed last week. Earnings were up 4.1 percent from November 2005.

Unemployment Rate

Economists reduced their estimate for the unemployment rate this quarter by one-tenth of a percentage point, to 4.5 percent. That will rise to 4.7 percent in the first quarter, unchanged from the prior estimate, and to 4.8 percent by mid-year, according to the survey.

The jobless rate in November rose to 4.5 percent from a five-year low of 4.4 percent. Even with the rise, the Fed is unlikely to change interest rates soon, some economists said.

The central bank will keep its target rate for overnight lending among banks at 5.25 percent in the first quarter of 2007 and lower it to 5 percent in the second quarter, according to the Bloomberg survey.

The Fed ``will continue to worry about inflation,'' Lehman's Harris said. ``It's much too early for them to declare victory.''

To contact the reporter on this story: Joe Richter in Washington at Jrichter1@bloomberg.net; Kristy McKeaney in Washington at kmckeaney@bloomberg.net.

Last Updated: December 11, 2006 10:19 EST