By Shobhana Chandra
May 27 (Bloomberg) -- The U.S. recession will probably end
in the third quarter, a survey of business economists showed,
even as rising joblessness indicates the recovery will be weaker
than previously estimated.
The world’s largest economy will begin to expand next
quarter, according to 74 percent of economists in a National
Association for Business Economics survey. Compared with NABE’s
February poll, growth will be slower and unemployment will be
higher in the second half of this year and through 2010.
Government stimulus spending and Federal Reserve efforts to
thaw credit markets are helping pull the economy out of the
worst slump in half a century, the survey said. While housing is
stabilizing, the economists predicted consumer spending will be
restrained by a deteriorating labor market as job losses
continue for the rest of the year.
“There are emerging signs that the economy is
stabilizing,” Chris Varvares, president of the group and of
Macroeconomic Advisers LLC in St. Louis, said in a statement.
Still, the recovery may be “considerably more moderate than
those typically experienced following steep declines,” he said.
The economy will shrink at a 1.8 percent annual rate from
April to June, and then grow at a 0.7 percent pace in the next
three months, the survey showed. Growth will accelerate to a 1.8
percent rate by the final quarter.
Spending to Fall
Consumer spending, which accounts for about 70 percent of
the economy, may fall 0.4 percent this year, compared with a 1.3
percent drop forecast in the prior poll. Purchases will increase
2.1 percent next year, less than estimated in February.
The NABE survey, based on the median forecast of a panel of
45 economists, was conducted from April 27 to May 11.
Signs of a U.S. recovery coincide with evidence that the
first global recession since World War II is easing. German
investor confidence rose to the highest since 2006 in May and
the Bank of Japan last week raised its view of the economy for
the first time in almost three years.
Policy measures by central banks and governments “have
assisted in reviving trust in the financial markets and the real
economy,” Deutsche Bank AG Chief Executive Josef Ackermann said
yesterday. “We can already see first positive signs.”
In the U.S., nine of every 10 survey participants said the
Fed’s new credit facilities improved borrowing conditions, and
55 percent said the programs also benefited markets that were
not directly targeted. At the same time, nearly half the
economists said credit was still hard to get.
Home sales may reach a bottom by mid-year, according to 72
percent of the panelists, and more than six in 10 predicted
housing starts will hit a trough by that time. The survey showed
home prices have further to fall, with 40 percent of the
respondents forecasting the declines will continue into 2010 or
Payrolls will decrease by an estimated 4.5 million in 2009,
pushing the unemployment rate to 9.8 percent by year-end, almost
a percentage point higher than the previous estimate of 9
percent, the survey showed. Job gains next year will help reduce
the jobless rate to 9.3 percent by the end of 2010.
The outlook for business investment this year also soured
compared with the February survey, reflecting sharper pullbacks
in spending on equipment, software and facilities, and a bigger
reduction in inventories. Economists in the survey also
predicted corporate profits will decline 16 percent this year.
The cost of living will fall and worker productivity will
improve this year, the NABE report showed. With inflation in
check and unemployment rising, Fed policy makers will keep the
benchmark interest rate close to zero until the second quarter
of next year, at which time a series of increases may push the
rate to 1.25 percent by year-end.
To contact the reporter on this story:
Shobhana Chandra in Washington at