The NABE Outlook panel revised, on Sept. 12, its growth projections downward for both 2011 and 2012. Real gross domestic product (GDP) is expected to advance 1.7 in 2011 (year-over-year), down from the panel's May prediction of 2.8%.
The downward revision reflects weaker-than-expected growth in the second quarter, as well as a weaker projection for growth in the second half of 2011, the group said. The panel anticipates growth in 2012 to edge up to 2.3 % (year-over-year), a growth rate slower than the May projection of 3.2%. Panelists view these forecasts to be highly uncertain, with 86% of forecasters seeing "much more" or "somewhat more" uncertainty than usual.
"Factors supporting growth include accommodative monetary policy, growth in the rest of the world, business investment spending, and pent-up consumer demand," said NABE president-elect Gene Huang, chief economist at FedEx Corp. "A wide variety of factors were seen as restraining growth, including low consumer and business confidence, uncertainty about future economic policies, a tepid housing market, and financial headwinds caused by tight credit conditions and balance sheet restructuring. Panelists are very concerned about high unemployment, federal deficits, and the European sovereign debt crisis."
The NABE forecast panel is less confident about the strength and sustainability of the recovery. Thirty percent of the survey respondents -- up from 11% in May -- view the economic recovery as "subpar with severe wealth losses and onerous debt burdens inhibiting spending and lending." Twenty-four percent -- down from 34% in the May survey -- think the recovery will continue at a moderate pace; 14% foresee an uneven economic expansion, with growth proceeding in "fits and starts;" 13% -- up from 3% in May -- now expect the economy will slip back into recession; and 12% expect subpar growth with rising inflation. Fewer respondents (7% in the current survey versus 29% in May) feel that the economy will overcome its headwinds and behave more in line with a traditional business cycle expansion.
Labor market conditions are expected to improve only gradually. Monthly payroll gains have been revised downward for both 2011 and 2012. Non-farm payrolls are forecast to rise, on average, 124,100 per month this year and 162,100 per month next year. The unemployment rate is expected to remain high, hovering around 9% in the fourth quarter of 2011 and edging down only to 8.5% in the final quarter of 2012. Most panelists do not expect the unemployment rate to fall back to levels consistent with full employment until 2017.