US Recession To End In Second Half: Survey

Source : The Business Times, May 28, 2009

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