Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Economists see 'sub-par' growth ahead

By Ben Rooney, staff reporter


NEW YORK (CNNMoney.com) -- The economy will remain sluggish early next year as the lingering effects of the recession continue to drag on growth and the benefit of government stimulus fades, a panel of professional forecasters said Monday.

In its November outlook, the National Association for Business Economics predicts that the U.S. economy will grow 2.7% this year. That's a slight improvement from the October survey, but is a far cry from the 3.2% rate the survey had projected in May.

Richard Wobbekind, the association's president, said in a statement that NABE members expect economic growth to be "sub-par" in the first quarter of next year, and "moderate" for 2011 overall.

The dim outlook reflects ongoing "balance-sheet restructuring" as consumers and businesses pay down debt and remain cautious about spending, he said. In addition, the inventory restocking that helped boost economic activity earlier this year will be "diminished" going forward, as will government supports under last year's Economic Recovery Act.

While NABE economists are concerned about the long-term effects of the U.S. budget deficit, high unemployment, changes in business regulation and rising commodity prices, they do not expect the economy to relapse into recession or suffer deflation.

"Confidence in the expansion's durability is intact," said Wobbekind.

Looking ahead, NABE expects economic growth of 2.4% in the first three months of next year, a slight improvement from the October survey. For the full year, NABE sees gross domestic product, the broadest measure of economic activity, expanding 3% in 2011.

Despite the modest growth forecast, the economists anticipate conditions in the labor market will improve slowly in the second half of next year, with employers expected to 150,000 to 170,000 jobs per month.

The unemployment rate will hold above 9.5% in the first six months of 2011, before easing to 9.2% by the end of the year, according to NABE.

Given the weary job market and "negligible growth" in household net worth, the economists expect retail sales this holiday season to be subdued, rising 2.5% from last year.

However, business spending on equipment and software will strengthen into next year, and the "tepid" recovery in the housing market will remain intact, the economists said.

The U.S. trade deficit will continue to widen as the outlook for exports has deteriorated while import growth was revised higher in the November survey. The net-export deficit will top $460 billion in 2011, according to NABE.

Global trade imbalances have been in the spotlight recently as economies with large deficits, including the United States, have called on surplus countries such as China to increase domestic consumption and refrain from devaluing currencies.

While the economists said there is a relatively low risk of "competitive currency depreciation" next year, they still expect the U.S. dollar to remain weak.

The dollar has been under pressure since the Fall, as investors bet the Federal Reserve would pump more money into the economy. The central bank officially announced its $600 billion bond-buying program earlier this month.

With that in mind, the economists expect the Fed to hold short-term interest rates near zero until late 2011, "due to the mix of persistently high unemployment and very low inflation."

Long-term interest rates will also remain low, the survey said, with the 10-year Treasury note now expected to yield 3.25% by the end of 2011, compared with 3.75% in the last survey. To top of page

Index Last Change % Change
Dow 17,689.86 -56.12 -0.32%
Nasdaq 5,128.28 -0.50 -0.01%
S&P 500 2,103.84 -4.79 -0.23%
Treasuries 2.20 -0.06 -2.78%
Data as of 3:01pm ET
Company Price Change % Change
Bank of America Corp... 17.88 -0.25 -1.38%
Micron Technology In... 18.51 -1.39 -6.98%
Facebook Inc 94.01 -1.20 -1.26%
Apple Inc 121.30 -1.07 -0.87%
Frontier Communicati... 4.72 0.09 1.94%
Data as of Jul 31
Sponsors

Sections

Some families are outraged at the sums they've been offered by Lufthansa as compensation for the Germanwings plane crash in March which killed 150 people. More

The U.S. economy has had pretty ho-hum start to 2015. But the stage is set for a strong second half of the year. More

Fast-food chains that operate in more than 30 locations nationwide are the sole target of a new rule in New York to hike their minimum wage to $15. But consumers and small business owners, as well as some employees, may be the ones to pay the price. More

You can't blame it on the economy anymore. More Millennials now have jobs, but are still living at home. More