Dec. 11 (Bloomberg) -- DuPont Co. Chief Executive Officer Charles Holliday said the U.S. economy will avoid a recession in 2008, buoyed by services and commercial construction as well as falling oil prices.

``The odds are not likely for a recession, but pretty slow growth,'' Holliday, 59, said yesterday in an interview in New York. ``So much of the economy is now the service sector that it takes more to take us into recession than it did.''

Morgan Stanley and Merrill Lynch & Co. have predicted the U.S. economy, the world's largest, will enter a recession as the worst housing slump in 16 years prompts lenders to tighten credit. Economists expecting the U.S. economy will shrink next year rose to nine last month from five in September, according to a survey by the National Association for Business Economics.

DuPont, based in Wilmington, Delaware, is the world's largest maker of car paint and supplies Corian countertops and Tyvek insulation to homebuilders. U.S. demand for automotive products will slow in the first half, Holliday said. Outside the U.S., where DuPont gets 60 percent of sales, growth remains ``solid,'' especially in Asia and Latin America, he said.

``We are in a recession in the U.S. housing industry right now,'' Holliday said. ``We think it will take longer to come back.''

Crude-oil prices may average about $85 a barrel next year, Holliday said, down from today's close of $90.02 in New York. DuPont, the third-largest U.S. chemical maker, expects the dollar to be little changed against the euro and yen, he said.

Corn Prices

Corn prices will average $3 to $3.50 a bushel, giving farmers confidence to boost spending on seeds and crop chemicals made by DuPont, Holliday said. Corn has averaged about $3.78 a bushel in Chicago this year after surging 81 percent in 2006.

DuPont's profit gains will be driven by the electronics business, particularly materials for making flat-panel displays and solar cells, and genetically modified seeds, Holliday said. Those businesses, along with biofuels and plant-based chemicals, will help DuPont maintain earnings after key drug patents expire, he said.

Hypertension treatments Cozaar and Hyzaar, marketed through Merck & Co., lose U.S. patent protection in 2010. They added $819 million to DuPont's profit last year, or 18 percent of the total.

``People are saying, `Can you make up the difference?''' Holliday said. ``I do not expect to see a down earnings year through this period of time when Cozaar goes off.''

Ag Business

Holliday's assurances were welcomed by investors concerned that earnings may drop, said Steve Hoedt, an analyst at National City Corp. in Cleveland who helps manage $34 billion in private investments, including 1.17 million DuPont shares. DuPont has fallen 5.8 percent this year, compared with a 3.9 percent gain for Dow Chemical Co., the largest U.S. chemical maker by 2006 revenue.

``If you start to see more material improvement out of the ag business, you could get a stream of positive surprises which would be a catalyst'' for a rally in DuPont's shares, Hoedt said yesterday in a phone interview.

DuPont fell $1.80, or 3.8 percent, to $45.89 at 4:01 p.m. in New York Stock Exchange composite trading, valuing the company at $41.3 billion. The Standard & Poor's 500 Index declined 2.5 percent as investors speculated the Federal Reserve's quarter-point interest rate cut won't be enough to prevent a recession.

Annual revenue in DuPont's agriculture unit, which accounts for 22 percent of the company's total, has increased an average of less than 1 percent since 2004 in the face of stiffer competition from Monsanto Co. Holliday oversaw DuPont's acquisition of the Pioneer seed unit in 1999.

Monsanto Share

Monsanto, based in St. Louis, grabbed about 5 percentage points of U.S. corn-seed sales this year and has boosted sales at least 16 percent for the past three years. The company has surpassed DuPont as the biggest U.S. corn-seed producer, prompting Holliday to boost investment in seeds by $100 million.

New seeds that resist insects in multiple ways will help close the gap in U.S. market share after 2008, Holliday said. DuPont's seed sales also are increasing outside the U.S., and the company may accelerate growth in the next six months by acquiring a partner, most likely in emerging market, he said.

``We will hold share next year in corn in the U.S. and start gaining after that,'' Holliday said. ``Our prospects look better in 2009 than in 2008.''

To contact the reporter on this story: Jack Kaskey in New York at jkaskey@bloomberg.net.

Last Updated: December 11, 2007 16:15 EST