Economists are scaling back on their 2011 and 2012 growth forecasts. They are now predicting that the economy will grow by only 1.7% this year, down from the 2.8% predicted earlier this year in May. In 2012 they are predicting 2.3% growth, down from 3.2%.
September 12, 2011, 11:17 am EDT
Martin Crutsinger, AP Economics Writer
WASHINGTON (AP) -- Confronted with an economy that has decidedly underperformed this year, economists are scaling back their growth forecasts for 2011 and next year.
In their latest forecast, top economists with the National Association for Business Economics predict that the economy will grow 1.7 percent this year -- down from the group's May prediction of 2.8 percent expansion. For 2012, the group is forecasting growth of 2.3 percent, compared to a May forecast of 3.2 percent growth.
The new survey, released Monday, is in line with the outlook of other economists who have marked down growth prospects to reflect an economy that has struggled this year to deal with a spike in gasoline prices, production disruptions stemming from Japan's earthquake, a flare-up of Europe's debt problems and a prolonged debate over America's debt ceiling.
"A wide variety of factors were seen as restraining growth, including low consumer and business confidence," said Gene Huang, the president-elect of NABE and one of 52 professional forecasters who participated in the survey.
"Panelists are very concerned about high unemployment, federal deficits and the European sovereign debt crisis," said Huang, who is chief economist at FedEx Corp.
The survey was done before President Barack Obama appeared before Congress on Thursday to unveil a new $447 billion plan to jump-start job growth through a combination of tax cuts and government spending.
The latest NABE outlook underscores the problems facing an economy that many economists fear could be in danger of slipping into another recession.
The expectations for overall economic growth, as measured by the gross domestic product, for both 2011 and 2012 were trimmed by a percentage point from the May forecast. The May estimates had been trimmed from February when the NABE analysts were forecasting growth of 3.3 percent this year.
The economy grew 3 percent in 2010, the first full year after the country emerged from the 2007-2009 recession, but slowed to an annual rate of just 0.7 percent in the first six months of this year.
Because of the slow growth, the NABE forecasters don't expect much improvement in the unemployment rate, which in August was stuck at 9.1 percent, a month when the economy didn't create any net new jobs.
For all of 2011, the economists are forecasting the unemployment rate will average 9 percent and will improve only slightly to 8.7 percent in 2012. In May, the NABE panel had projected unemployment would average 8.7 percent this year and 8.2 percent next year.
Job growth was projected to average 124,000 per month this year, instead of the 190,000 average monthly job gains the economists had forecast in May. Next year's average job growth was put at 162,000, instead of the 202,000 job gains forecast in May.
The economy needs to add at least 250,000 jobs a month to rapidly bring down the unemployment rate. The rate has been above 9 percent in all but two months since May 2009.
The NABE panel forecast that builders would start work on 590,000 new homes this year, no improvement from last year's weak pace, while sales of new cars was put at 12.6 million units, up a modest 8.6 percent from the 11.6 million new vehicles sold in 2010.
The economists did see a little better outlook for oil prices, which they projected would average $90 per barrel in December, down from a forecast of $105 per barrel in May. Oil was trading Friday around $87 per barrel.
The new NABE forecast was prepared for the group's annual conference, being held this year in Dallas
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