Recession Not in Forecast, Poll Indicates

The U.S. economy should manage to escape a full-blown recession, but its growth is meager and it is “skating on thin ice,” the closely watched Blue Chip survey of economists said Sunday.

“A large majority of our panel members continue to believe the U.S. economy will manage to avoid suffering even one quarter of negative [gross domestic product] growth, much less the two consecutive quarters that traditionally define a recession,” Blue Chip Economic Indicators said in its latest monthly poll.

“But faith in that favorable outcome is being tested on an almost daily basis as one indicator after another signals that activity in many key sectors of the economy continues to deteriorate,” it added.

Blue Chip said that in the most recent consensus forecast, private economists slashed their projections on second-quarter economic growth to 1% from 1.5% in the survey a month ago.

They predicted growth would accelerate to 2.1% in the third quarter and 3% in the fourth--rates that experts believe would still leave the economy plenty of slack.

Economists expected that the economy would get some help from the Fed’s sharp interest rate reductions, plus the recently enacted tax cut package that gives American households lump-sum rebate checks, with a gradual lowering of income tax rates.

As indications of the fragile state of the economy, the survey cited, among other things, the dismal data on the factory sector and the May U.S. employment statistics.