Backpedaling Time for Bears

"The housing number was totally distorted by [the warm] weather," he said. "To me, that's noise."

At any rate, his slight retreat is notable considering his past position, and he isn't the only bear looking for a coat change.

"Although we continue to believe that economic growth in 2007 will be subpar, recent incoming information has induced us to modify the forecast a bit," Paul Kasriel, director of economic research at Northern Trust in Chicago, wrote in a Jan. 9 memo.

Kasriel upped his GDP forecast to 2.3% for 2007, with a 2.5% first-quarter growth figure. At the beginning of December his forecast for first-quarter growth stood at 1.8%.

Even so, he believes the housing sector, which slowed considerably last year, could still weaken the broader economy."I'm not convinced that some of this late fourth-quarter event is not related to weather," he says.

Then there are the economists in the forecast early and forecast often camp.

"We are less pessimistic than a month ago, but more pessimistic than were we were two months ago, says Joe LaVorgna, chief U.S. economist at Deutsche Bank in New York. He concedes that overall, his view is more bearish than most on Wall Street.

LaVorgna forecasts GDP growth at 1.8% in the first quarter followed by 1.9% in the second quarter. His full-year prediction is about 2%. Weakness in the housing and auto segments of the economy will be primarily responsible for the softness, he says.

For now at least, one notable bear who appears to be sticking to his thesis is David Rosenberg, an economist at Merrill Lynch in New York.

"We may be too optimistic at 1.7% GDP growth in 2007," he stated in a Nov. 28 report. "And yet we are at the bottom of the consensus barrel."

By Jan. 4, he was still singing a similar tune. "We think that the spreading influence of the housing recession will be more evident in the year ahead," he wrote in a research report. Rosenberg wasn't available for comment.