U.S. growth forecasts slide after summer weakness
A forecasting panel for the National Assn. for Business Economics on Monday cut its growth estimates for the U.S. economy in 2010 and 2011, conceding that it hadn't anticipated the extent of the slowdown that hit in spring and continued in summer.
The panel of 46 of the group’s 2,300 members predicted that the economy would grow at a real (after-inflation) rate of 2.6% this year and the same rate next year, down from a May forecast of 3.2% for both years.
U.S. gross domestic product growth slowed to an annualized pace of just 1.7% in the second quarter, down from 3.7% in the first quarter and 5% in the fourth quarter of last year. Many analysts believe that growth in the quarter ended Sept. 30 was between 1.5% and 2.0% -- better than a recession, but obviously far too slow to foster meaningful job creation.
“This summer’s slowdown has exposed the economy’s sensitivity to wealth losses, the unwinding of debt, and the reductions in economic stimulus,” NABE President-elect Richard Wobbekind said in a statement.
“Confidence in the expansion’s durability is intact, but recent economic weakness has prompted many panelists to scale back expectations for the year ahead,” said Wobbekind, who is associate dean of the Leeds School of Business at the University of Colorado-Boulder.
Consumer spending -- the main driver of U.S. growth -- will “remain modest throughout the forecast horizon due to weak job gains, persistently high unemployment, and negligible growth in household net worth reflecting only small gains in the stock market and home prices,” the NABE said.
It predicted holiday retail sales this year would be “especially weak,” rising 2.5% from last year.
The panel’s “dominant characterization” of the recovery is that it will remain “subpar as severe wealth losses and onerous debt burdens inhibit spending and lending.” That characterization was shared by 37% of the panel members.
The NABE forecasters still are more optimistic about 2011 than the International Monetary Fund, which last week cut its U.S. growth forecast for next year to 2.3% from 2.9%.
And the NABE and IMF both are relatively upbeat compared with Goldman Sachs & Co. economists, who expect U.S. growth to be just 1.8% in 2011.
Goldman expects dismally slow growth despite its prediction that the Federal Reserve soon will announce a huge new program of Treasury-bond purchases aimed at flooding the economy with more cash -- so-called quantitative easing.
After last week’s lousy report on September employment, it’s now practically universal among Wall Street pros and the ranks of economists that the Fed will try to ride to the rescue again by printing massive amounts of money.
-- Tom Petruno