Economists see economic growth

Don Hogsett, Staff Staff, October 7, 2002

A panel of 32 key business economists is forecasting steady, if slow, growth in the U.S. economy — about 3 percent in the second half of this year and 3.3 percent to 3.8 percent next year — and says the growth with will come even without further prodding or interest rate cuts from the Federal Reserve.

"Policy makers don't need to rush to the aid of the economy," said Tim O'Neill, president-elect of the National Association for Business Economics (NABE) at the group's annual meeting here. "Economic growth may not be supercharged, but it is solidly positive. It should even accelerate to somewhat above 3 percent in 2003, without any more government help."

Moreover, said the economist, "most of the potential perils that grab headlines — double-dip recession, deflation and a housing market 'bubble'— are possibilities viewed as remote" by the 32 economists whose views are recorded in this year's forecast.

Key findings in the survey:

  • "After a slow second quarter, NABE economists expect economic growth to pick up to around 3 percent in the second half of 2002, and 3.3 percent to 3.8 percent in each quarter of 2003."

  • "The terrorists didn't win. One year after Sept. 11, over half our panel believes the attacks had either a minor impact on the economy or actually shortened the recession by spurring massive monetary and fiscal stimulus."

  • "Capital spending remains in the doldrums. It will record a decline of over 5 percent for the second year in a row, and the 2003 rebound will be anemic. Panelists cite poor profits and excess capacity, not a credit crunch or corporate scandals, as the reasons for business investment caution."

  • "Interest rates should stay lower for longer. Low rates have undone much of the damage caused by equity market declines and higher oil prices. They will continue to support growth during 2003."

  • "Inflation will remain tame, with the Consumer Price Index hovering just above 2 percent and the Gross Domestic Product deflator just below 2 percent through 2003."

  • "Nearly 80 percent of our panelists agree with Fed Chairman Alan Greenspan that it is unlikely there is a housing market 'bubble.'"

  • "Middle East turmoil continues to pose the biggest risk to our panelists' economic forecast."

2003 Economic Forecast

Source: National Association for Business Economics
Real GDP 3.2%
Personal consumption spending 3.0
Business fixed investment 5.0
Residential investment 1.5
Government purchases 2.7
Exports 6.6
Imports 6.6
Corporate profits (after-tax) 14.1
Non-farm payroll employment 2.3
Non-farm hourly compensation 3.5
Unemployment 5.8
Industrial Production 4.2
Consumer Price Index 2.3

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