A survey of economist released today by the National Association for Business Economics indicates that more economists expect slower economic growth in the US for the remainder of the year and into next year. Their findings:
- The NABE Outlook panel cut its growth predictions for 2010 and 2011. Real gross domestic product (GDP) is now expected to advance 2.6 percent in 2010, down from the panel’s May prediction of 3.2 percent. While some of this reduction relates to historical data revisions, most of the markdown reflects worse-than-expected summer results and a dimmed outlook. Next year’s 2.6 percent gain shows the lack of a typical cyclical rebound and only matches the long-term growth trend previously expected by the NABE panel.
- The latest NABE forecast reflects a greater appreciation of the importance of stimulus policies in countering forces holding down the economy’s performance. Seventeen percent of survey respondents characterized the expansion as “uneven, dominated by stimulus policies.” That is up from just 5 percent in May. The dominant characterization of the economic “recovery”—held by 37 percent of the NABE Outlook panel—was that of an expansion remaining “subpar as severe wealth losses and onerous debt burdens inhibit spending and lending.” Any “stagflation scenario,” combining persistently weak growth and escalating inflation, remains a long-shot.
- Consumer spending is expected to 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. This year’s holiday retail sales are expected to be especially weak, rising only 2.5 percent from last year. While most forecasters attribute the recent rise in household saving to “fundamentals,” especially losses in household wealth, one in five believe an attitudinal shift toward greater thrift has been the key driver behind increased saving.
In other words, despite the campaign rhetoric, it ain’t getting better.