The latest revision to US gross domestic product (GDP) showed the world's largest economy expanded at a tepid 2.2 percent pace in the fourth quarter, instead of the 3.5 percent growth spurt in the official estimate a month earlier.

That was the sharpest downward revision in a decade, and was attributed to weak business spending and a drawdown of inventories from cautious firms.

Still, most forecasters say the economy will muddle through 2007 at a sluggish pace, in line with Federal Reserve forecasts.

But some say the picture is more shaky than it appeared a few weeks ago. And many are renewing forecasts for interest rate cuts by the Federal Reserve sometime this year to help pick up the pace of economic activity.

Manufacturing has been sluggish, highlighted by the 7.8 percent drop in durable goods orders last month.

And some say the US has yet to see the full effect of the housing downturn, reflected in the 19.1 percent slide in residential investment in the fourth quarter.

The end of the real estate boom has resulted in high failure rates among risky or "subprime" mortgages, given to borrowers with below-average credit ratings, and some say this crisis could spill over.

"We are seeing cracks in this easy-money-now-not-so-easy environment," said Andrew Busch, analyst at BMO Nesbitt Burns.

He said 20 subprime lenders "have either shut down or been forced to shut down" and more failures are expected. While most major banks are not in the sector, a wave of failures could spread throughout the financial system, some warn.

Stephen Gallagher, economist at Societe Generale in New York, said the sub-prime lending pullback "is a mini crisis that raises questions about complacency in general."

"It has become a case of extreme illiquidity that tends to shake out weaker hands," he said.

Another concern is the rise in the Japanese yen, which could hurt the so-called "carry trade" that provides liquidity to the US and other markets.

These concerns have whipsawed global equity markets, which saw one of the worst weeks in years, sparked by a nine percent plunge in Shanghai's stock market on Tuesday.

"Hedge funds borrow yen at very low interest rates to fund US investments. When the yen strengthens, it makes the repayment of those loans more expensive," said Dick Green, analyst at Briefing.com.

"So, perhaps a rising yen will force some hedge funds to sell stocks to cover exchange rate losses. Perhaps."