Although a full-blown recession is not expected, the sluggish U.S. growth could affect exchange traded funds (ETFs) through the first quarter of 2008.  Economists say the interest rate cuts helped remedy chances of a big recession, reports Emily Kaiser for Reuters.  The slower growth will leave the economy vulnerable to any unanticipated bumps in the road.

Real gross domestic product (GDP) growth is expected to slow to 1.7% annual rate for this quarter. The 2008 growth forecast for real GDP remains at 2.4%, putting the U.S. economy below the long-term trend growth rate below 3% for the third year in a row. Strong exports, the Federal Reserve’s interest rate cuts and conservative hiring and inventory management where business is concerned should protect the broad economy from the housing sector slump.

Risks to the economy include a deeper and longer housing slump, high inflation, and a broadening of the credit crunch. Consumer spending will be tight as higher home heating oil costs and rising gas prices hit wallets nationwide.

Tags: Federal Reserve, Sector ETFs