Economic Outlook Is Boosted

Top forecasters raised their outlook for U.S. economic growth in 2005 for the second straight month but said high oil prices and rising interest rates probably would slow growth in the months ahead, a survey released Monday showed.

Just more than half of the panelists surveyed in the Blue Chip Economic Indicators newsletter bumped up their projection for gross domestic product growth this year, taking the consensus to 3.6% from 3.5% forecast in June.

The outlook for 2006 growth was unchanged at 3.3%.

Inflation forecasts were also revised higher.

Forecasters believe that the consumer price index will climb 3% this year, the largest rise since 2000, up from 2.9% forecast a month ago. The inflation forecast has been ratcheted up four months in a row from 2.5% in March.

Inflation was forecast to ease in 2006 to 2.5%.

Higher energy prices remain a key concern.

“While growth in consumer spending, business investment and hiring have held up well in the face of rising prices for crude oil and refined products, it is taking a toll,” the newsletter said. “The consensus estimates that high energy prices will subtract about 0.5 of a percentage point from the rate of real GDP growth this year.”

About 41% of the panelists said crude oil prices would rise to $90 a barrel before they next hit $30 a barrel, and 59% said it would hit $30 first.

U.S. crude oil prices fell Monday to $58.65 a barrel as worries about damage to U.S. oil and gas facilities from Hurricane Dennis eased.