Business economists cut national growth forecast

Washington —A group of top business economists cut their forecast Monday for U.S. growth through 2011, saying high debts and a decline in the nation’s wealth would inhibit spending and investing.

The National Assn. for Business Economics reduced its forecast for annual growth in the gross domestic product to 2.6% for 2010, down from a springtime estimate of 3.2%. Similarly, the group cut projected 2011 growth to 2.6% from 3.2%.

NABE also said the U.S. unemployment rate is likely to remain above 9% till the end of 2011 — a forecast that would “mark the worst post-recession job recovery on record.”

In its latest survey of 46 forecasters, the group said most believe the U.S. won’t slip back into another recession. Yet they see little evidence that growth will sharply accelerate in the near future.

“Confidence in the expansion’s durability is intact, but recent economic weakness has prompted many panelists to scale back expectations for the year ahead,” said Richard Wobbekind, economist at Leeds School of Business at the University of Colorado at Boulder. He’s the incoming NABE president.

Low stock prices, falling home values and persistently high unemployment would curtail spending by anxious consumers, economists say.

Weakness in the U.S. housing market, historically a major driver of economic growth, would also constrain the recovery, NABE members said. Forecasters predict 750,000 housing starts in 2011, bouncing along a 60-year low.

The lone bright spot: business spending on new equipment. The NABE projects double-digit growth in business investment, propelled in part by strong profit growth.

Still, the group expects business earnings to rise almost 7% in 2011, compared with an estimated 25% in 2010 and with 15% in 2009.

The biggest concern among business economists is the U.S. budget deficit and exploding national debt. They expect the national deficit to fall slightly in fiscal 2011, to $1.2 trillion.

“NABE panelists continue to characterize excessive federal indebtedness as their single greatest concern going forward, even exceeding worries about high unemployment, and far greater than either inflation or deflation,” the group’s survey said.

Bartash writes for MarketWatch.com/McClatchy.