Economists cut U.S. growth forecast again

WASHINGTON, Sept 9 (BestGrowthStock) – Projected U.S. economic
growth for the rest of this year and next was revised down for
a third month in a row by a panel of about 50 economists.

The latest Blue Chip Economic Indicators report on Thursday
said the weaker outlook for second-half 2010 growth stemmed
from lower expectations for consumer spending, business
investment and private construction.

“Growth in the current quarter now is expected to be little
better than the disappointingly soft advance registered last
quarter,” the survey said. Gross domestic product grew at a
meager 1.6 percent annual rate in the second quarter, less than
half the first quarter’s 3.7 percent rate.

But the economists’ group said that, after the mid-year
soft patch, it saw a gradual improving trend setting in with
growth slightly surpassing trend rate in the second half of
2011.

Blue Chip defines GDP trend growth at about 2-3/4 percent a
year.

“For all of 2010, real GDP now is forecast to increase 2.7
percent on a year-to-year basis, 0.2 of a percentage point less
than a month ago and 0.6 of a point less than predicted in
June,” the survey said.

Its consensus forecast for real GDP growth in 2011 was cut
by 0.3 of a percentage point from a month ago to 2.5 percent.

“Given the depth of the recession, a forecast of roughly
trend growth this year and next amounts to a very disappointing
pace of recovery, with little progress expected to be made in
lowering the unemployment rate,” the forecast said.

Its consensus forecast is that the U.S. unemployment rate
will end this year at 9.6 percent and fall only to 9 percent by
the end of 2011.

It forecast that after averaging 554,000 new housing units
in 2009, starts this year will rise to 600,000 and to 760,000
units in 2011. “Although residential investment appears
destined to subtract from GDP in the second half of this year,
double digit growth is expected by early 2011, with rates of
growth over 30 percent by the second half,” Blue Chip said.

The economists said they expect short-term interest rates
to remain very low before starting to rise next summer. They
said the Federal Reserve — the U.S. central bank — likely
will keep the federal funds rate at its current range of zero
to 0.25 percent through mid-2011, finally raising it to 0.75
percent by the end of 2011.
(Reporting by Glenn Somerville; Editing by James Dalgleish)

Economists cut U.S. growth forecast again