The reeling U.S. economy is poised to emerge from recession in the second half of the year, but recovery will be lackluster, a survey of economic forecasters showed on May 27. The National Association for Business Economics said a survey of 45 professional forecasters found that the consensus believed the end of the prolonged recession that began in December 2007 was finally was in sight.
"While the overall tone remains soft, there are emerging signs that the economy is stabilizing," according to NABE's latest survey and its president, Chris Varvares. "The survey found that business economists look for the recession to end soon, but that the economic recovery is likely to be considerably more moderate than those typically experienced following steep declines," said Varvares, who is president of Macroeconomic Advisers.
The NABE outlook showed that panelists expected gross domestic product (GDP) -- the country's goods and services output -- to shrink by 1.8% in the second quarter. But the NABE panel, in the survey taken between April 27 and May 11, downgraded the outlook for the next several quarters. The panelists said a sharp pullback in business investment was stoking near-term weakness, and cited rising government spending as a "vital support" to the ailing economy.
The consensus forecast continued to see a "modest" rebound in the second half, beginning in the third quarter, "followed by steady improvement," NABE said. But overall the lackluster rebound was expected to post a meager 1.2% annual pace, "well below trend," in the second half of the year. That would include growth of 1% in the third quarter and 2.1% in the fourth quarter.
For 2010, meanwhile, the NABE pegged average growth at just 2%, down from its earlier projection of 2.4% growth.
NABE said the key downside risks continued to loom large: steep job losses, extremely tight credit conditions and falling home prices. "These same forces are causing consumers to remain cautious, a feature that NABE panelists think is here to stay," the association said. Consumer spending is considered key to economic recovery since it represents about two-thirds of U.S. output.
The NABE panel predicted that labor market conditions would deteriorate further, but the pace of job losses would decline through the rest of the year. "A total of roughly 4.5 million jobs are expected to be lost in 2009, driving the unemployment rate to 9.8% by year-end," NABE said. The panelist projected "modest" job gains in 2010 that would trim the unemployment rate to 9.3% by the end of next year.
Copyright Agence France-Presse, 2009