Forecasters Turn Bullish on the Economy

There’s a new story this morning saying that the National Association for Business Economics is more optimistic on the economy.

The panel of forecasters boosted its expectations for growth in 2010 to 3.2 percent real gross domestic product, up from 3.1 percent in its February outlook. It also pegged the 2011 growth rate at 3.2 percent.
Household spending, while still lagging the overall economy, is still expected to grow significantly this year. The forecasters attribute part of that to consumers being less thrifty, with the saving rate for 2010 seen dropping to 3.4 percent from the 4.6 percent they predicted just three months ago.
Business investment also is expected to fuel the recovery. The economists expect higher operating rates and rising corporate profits boosting companies’ spending on equipment and software, while retailers restock inventory.

That may sound good, but if the forecast is correct it means the jobs market still has a long way to go. For the unemployment rate to start dropping in a serious way, the economy will have to grow faster than 3% for several quarters. In fact, it would be much better if it grew by 4% to 5%.
The only silver lining is that these forecasts have a notoriously poor track record.

Posted by on May 24th, 2010 at 9:57 am


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