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Economists: Look for 4 Percent GDP Growth

By    |   Thursday, 16 Jul 2009 09:10 AM

Investors can expect to see a 4 percent growth in gross domestic product, say Brian Wesbury and Robert Stein.

Wesbury, the chief economist at First Trust Advisors in Wheaton, Ill., and Robert Stein, a senior economist, said their scenario is plausible.

"When we tell people this forecast, we often get looks as if we are out of our minds, and those are just the polite responses," they told Forbes Magazine.

The economists said business investories will drop and in 2010 will be $25 billion lower than right now.

"So even though inventories are still falling, the fact that they are falling more slowly adds to your production," Wesbury and Stein said.

While the trade deficit will continue to slide, the gap will be tightened, the economists say.

"The trade deficit was 5.4 percent of GDP in early 2007 and is now only about 2.2 percent of GDP. If the trade gap declines to 1.1 percent by the end of 2010, net exports can contribute 0.9 points to the real GDP growth rate," Wesbury and Stein say.

They think home building will start to rise in 2010, and consumer spending will pick up again while government spending continues to add to GDP growth.

"Adding up all these factors leaves us with an average expected real GDP growth rate of 4.2 percent. We get there with what we think are very conservative estimates on consumption and business investment,’’ they say. “For the consensus forecast to remain at 2% real GDP growth, there must be some very, very pessimistic assumptions out there. We wonder what they are."

A few positive quarters doesn’t demonstrate that the recession will end soon and is a misconception, said Joe LaVorgna, chief U.S. economist at Deutsche Bank, in Forbes.

"We continue to believe that recent optimism regarding a near term end to the recession is premature," he said.

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Investors can expect to see a 4 percent growth in gross domestic product, say Brian Wesbury and Robert Stein.Wesbury, the chief economist at First Trust Advisors in Wheaton, Ill., and Robert Stein, a senior economist, said their scenario is plausible. "When we tell people...
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2009-10-16
Thursday, 16 Jul 2009 09:10 AM
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