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Thread: US recession to end in second half: survey

  1. #1
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    Default US recession to end in second half: survey,00.html?

    Published May 28, 2009

    US recession to end in second half: survey

    But forecasters see lacklustre rebound posting meagre 1.2% annual pace

    (WASHINGTON) The reeling US economy is poised to emerge from recession in the second half of the year, but recovery will be lacklustre, a survey of economic forecasters showed yesterday.

    The National Association for Business Economics (NABE) 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 in sight.

    'While the overall tone remains soft, there are emerging signs that the economy is stabilising,' 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 Mr Varvares, who is president of Macroeconomic Advisers.

    Subscribing to the same view, prominent economist Martin Feldstein told Reuters in Athens that the United States may not see a sustainable recovery before next year even if there is positive growth in the second quarter.

    'I still hold the view that a sustainable recovery in the United States will start in 2010, if we are lucky,' said Mr Feldstein, a Harvard University professor who sits on US President Barack Obama's Economic Recovery Advisory Board.

    'We may see some positive growth in the second quarter but it will not be the beginning of a sustainable recovery,' he said in an interview on the sidelines of an economic conference in the Greek capital. 'When we look at Q3 and Q4 what we still see is weak exports and consumers raising their savings rate.'

    The Economic Recovery Advisory Board was tapped by Mr Obama to help shape his response to the economic crisis.

    The NABE outlook showed that panellists expected gross domestic product (GDP) to shrink by 1.8 per cent 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 panellists 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 lacklustre rebound was expected to post a meagre 1.2 per cent annual pace, 'well below trend', in the second half of the year.

    That would include growth of 1.0 per cent in the third quarter and 2.1 per cent in the fourth quarter.

    For 2010, meanwhile, the NABE pegged average growth at just 2.0 per cent, down from its earlier projection of 2.4 per cent 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 panellists think is here to stay,' the association said.

    Consumer spending is considered key to economic recovery since it represents about two-thirds of US output.

    The NABE panel predicted that labour 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 per cent by year-end,' NABE said.

    The panellist projected 'modest' job gains in 2010 that would trim the unemployment rate to 9.3 per cent by the end of next year. -- AFP, Reuters

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    May 28, 2009 Thursday

    US recession could end in next quarter

    Govt stimulus spending and Fed efforts paying off, key survey shows

    WASHINGTON: - The US recession will probably end in the third quarter of this year, a key survey of business economists showed, even as rising joblessness indicates the recovery will be weaker than previously estimated.

    The world's largest economy will begin to expand next quarter, according to 74 per cent of leading forecasters in a National Association for Business Economics (Nabe) survey. Compared with Nabe's February poll, growth will be slower and unemployment will be higher in the second half of this year and through 2010.

    Government stimulus spending and Federal Reserve attempts to thaw credit markets are helping to pull the economy out of the worst slump in half a century, the survey said. While housing is stabilising, the economists predicted that consumer spending will be restrained by a deteriorating labour market as job losses continue for the rest of the year.

    'There are emerging signs that the economy is stabilising,' Mr Chris Varvares, president of the group and of Macroeconomic Advisers, said in a statement. Still, the recovery may be 'considerably more moderate than those typically experienced following steep declines', he said.

    The economy will shrink at a 1.8 per cent annual rate from April to June, and then grow at a 0.7 per cent pace in the next three months, the survey showed. Growth will accelerate to a 1.8 per cent rate by the final quarter.

    Consumer spending, which accounts for about 70 per cent of the economy, may fall 0.4 per cent this year, compared with a 1.3 per cent drop forecast in the prior poll. Purchases will increase 2.1 per cent next year, less than estimated in February. The Nabe survey, based on the median forecast of a panel of 45 economists, was conducted from April 27 to May 11.

    Nine of every 10 participants said the Fed's new credit facilities improved borrowing conditions, and 55 per cent said the programmes also benefited markets that were not directly targeted. At the same time, nearly half the economists said credit was still hard to get.

    Home sales may reach a bottom by mid-year, according to 72 per cent of the panellists, and more than six in 10 predicted that housing starts will hit a trough by that time. The survey showed home prices have further to fall, with 40 per cent of the respondents forecasting the declines will continue into next year or later.

    Payrolls will decrease by an estimated 4.5 million this year, pushing the unemployment rate to 9.8 per cent by year-end, almost a percentage point higher than the previous estimate of 9 per cent, the survey showed. Job gains next year will help reduce the jobless rate to 9.3 per cent by the end of 2010.

    The outlook for business investment this year also soured compared with the February survey, reflecting sharper pullbacks in spending on equipment, software and facilities, and a bigger reduction in inventories. Economists in the survey also predicted corporate profits will decline 16 per cent this year.

    The cost of living will fall and worker productivity will improve this year, the Nabe report showed. With inflation in check and unemployment rising, Fed policy makers will keep the benchmark interest rate close to zero until the second quarter of next year, at which time a series of increases may push the rate to 1.25 per cent by year-end.


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