U.S. poll sees strong 2004 growth

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Last updated at: (Beijing Time) Tuesday, November 25, 2003

U.S. poll sees strong 2004 growth

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The U.S. economy will see its strongest growth in 20 years next year, led by business spending and exports, with employment slowly rising as excess capacity is absorbed and inventories climb, according to a poll of business economists released Monday.

The 28 professional forecasters surveyed by the National Association for Business Economics expect growth in U.S. gross domestic product to rise to 4.5 percent in 2004 from an anticipated 3.0 percent this year.

That would mark the strongest growth since a 7.4 percent gain in 1984, according to the U.S. Department of Commerce.

The forecasts were up from predictions in September for 4.0 percent growth in 2004 and 2.6 percent in 2003, reflecting growing confidence among U.S. business that the economic recovery is finally here to stay, NABE said.

"We see a stronger expansion developing, one that should be sufficient to gradually put idle resources, both workers and factories, back to work," NABE president Duncan Meldrum said in a statement.

There were few concerns about deflation or inflation, with the consumer price index expected to rise a moderate 2.3 percent this year and 1.7 percent during 2004.

Still, the panelists believe renewed growth might lead the Federal Reserve to begin removing some of the monetary easing introduced in 2001 and 2002, with half of the respondents expecting the first Fed rate hike during the second quarter of 2004. Only 14 percent expect 2004 to end with the current level of overnight borrowing rates.

While employment has lagged the broad recovery, the NABE poll forecast job growth of just under 2.0 percent next year, pushing the average unemployment rate down to 5.8 percent.

The panel sees business spending surging 10 percent and a 7.5 percent increase in exports during 2004, helping to broaden the halting, consumer-led recovery from the 2001 recession.

The NABE forecasters expect consumers to retain a big role in the expansion, with personal spending forecast to grow 3.7 percent in 2004, after a projected 3.1 percent rise in 2003.

The panelists said the gradual climb in mortgage rates from lows in June will have a small impact on home sales and housing starts next year, with 65 percent of respondents predicting only a slight decline -- defined as a drop of between 5 percent and 15 percent in volume -- in that key sector.

The overwhelming majority of forecasters said the holiday shopping season would be better than the cheerless one that closed out 2002, with 46 percent predicting sales gains of 3 percent to 5 percent compared to a year earlier, while 43 percent expected an improvement of more than 5 percent.

"The improved rate of growth should begin absorbing the excess capacity that currently exists in the economy," NABE said in its outlook.

The panel saw a $42 billion rise in inventories in 2004, more than reversing the estimated $9 billion decline in stocks in 2003. The restocking effort will push industrial capacity utilization to 76.4 percent in 2004 from 73.1 percent this year, the panel said.

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