Economists See Recovery Faster Than Anticipated
The U.S. economy is breaking out of recession with unexpected speed and may grow at a 3.7% rate in the second half of this year, according to the Blue Chip Economic Indicators survey.
The consensus forecast calls for gross domestic product to increase in the first quarter of this year at a 2.6% annual rate, compared with 1.6% in last month’s forecast. The most optimistic economists said first-quarter growth would exceed 4%, the fastest pace in almost two years. The economy grew at a 1.4% rate in the fourth quarter of 2001.
“The majority of forecasters have been blindsided by the continued strength in consumer spending, and more recently, by tentative signs that business investment in equipment and software has begun to recover,” the report said.
Wal-Mart Stores Inc. and Target Corp. are among retailers whose sales have risen this year as their low-priced merchandise lured buyers. Auto sales also have held up better than expected, helped by cash rebates.
A 3.7% growth rate in the third and fourth quarters would follow a projected 3.2% pace in the second quarter. The economy grew 1.2% last year, when the U.S. went into recession, and contracted at a 1.3% rate in the third quarter.
For 2002 as a whole, the economy probably will grow 2%, the March survey showed. That’s a half percentage point faster than last month’s estimate and twice as fast as December’s forecast. The economy grew 4.1% in 1999 and 2000.
The rebound, which just three months ago was expected to barely get going in the first quarter, probably will keep unemployment from rising much more. The jobless rate will peak at 5.9% in the April-June period and fall to 5.8% by the end of the year, according to the consensus of 52 forecasts in the survey. Unemployment was 5.5% in February.
The strength of the recovery helps explain why the economists in this month’s survey predict that Federal Reserve Chairman Alan Greenspan and his colleagues will raise interest rates in August or September. The Fed’s policymaking Open Market Committee probably will say even sooner that the risks to the economy remain balanced between inflation and weak growth.
