The U.S. economy, the world’s largest, will expand less than previously estimated as a lack of jobs restrains consumer spending through 2011, a survey showed.
Gross domestic product will increase 2.6 percent this year and next, according to the median of 46 economists surveyed by the National Association for Business Economics from Sept. 2 to Sept. 21. A May poll projected growth of 3.2 percent for both years. Economists also cut estimates for personal spending, employment and consumer prices.
A plurality of 37 percent of economists surveyed characterized the expansion that began in June 2009 as “subpar,” reflecting declines in household wealth and “more onerous debt burdens” that are limiting purchases and lending. The share of respondents saying the expansion is uneven and “dominated by stimulus policies” increased to 17 percent from 5 percent in May.
“Confidence in the expansion’s durability is intact, but recent economic weakness has prompted many panelists to scale back expectations,” NABE President-elect Richard Wobbekind, associate dean of the Leach School of Business at the University of Colorado-Boulder, said in a statement. “This summer’s slowdown has exposed the economy’s sensitivity to wealth losses, the unwinding of debt, and the reduction of economic stimulus.”
Consumer spending adjusted for inflation will expand 1.5 percent in 2010 and 2.3 percent in 2011, according to the NABE survey. Median projections in May for this year and next were 2.6 percent and 2.8 percent, respectively.
Sales for the holiday shopping season will rise 2.5 percent compared with last year, according to the median forecast, a gain the survey called “especially weak.”
While the loss of wealth is probably the main reason households are boosting savings, an “attitudinal shift toward greater thrift” is probably also a reason, according to one of every five economists polled.
The slower consumer spending projections reflect weaker employment gains and “negligible growth” in household wealth, NABE said. U.S. job gains will average 94,000 a month this year, down from the 120,000 projected in May, according to today’s survey. They will average 153,000 in 2011, down from the 225,000 projected five months ago.
The unemployment rate will remain at 9.5 percent or higher through the middle of next year and then ease to 9.2 percent by the end of 2011, according to economists in today’s survey.
The U.S. lost 95,000 jobs in September, led by a drop in government employment, and the unemployment rate held at 9.6 percent, the Labor Department said last week. So far this year, an average 68,000 jobs have been added per month.
Economists surveyed boosted their forecasts for business investment and government spending this year and trimmed them for 2011. Spending on equipment and software will rise 14.6 percent in 2010 and 10.3 percent in 2011, compared with the 10.7 percent and 11 percent, respectively projected in May.
Government spending will increase 0.9 percent this year and 1.1 percent in 2011, according to the survey. That compares with 0.7 percent and 1.2 percent forecast in May.
Finally, economists lowered their expectations for inflation, saying the consumer price index would rise 1.6 percent in 2010 and 1.5 percent in 2011. In May they had forecast 2 percent for both years. Even so, panelists still ranked inflation as a slightly greater concern than deflation.
Federal Reserve policy makers are now debating how to deploy tools for more unconventional easing to help sustain the economic expansion and protect prices.
The Fed will keep its benchmark federal funds rate near zero through the beginning of next year, and end 2011 at 0.5 percent, according to the survey.
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