Econ Forecast- And there's a bridge to sell ya.....
U.S. Economy to Grow 4.5% in 1st Half, Bloomberg Survey Says
Bloomberg ^ / 9 March 2004 / Andrew Ward, Kevin Miller
March 9 (Bloomberg) -- The U.S. economy will expand 4.5 percent in this year's first half, faster than predicted a month ago as tax refunds buoy consumer spending, according to the median forecast in a Bloomberg News monthly survey. Economists raised their growth estimates for the April-June period to 4.5 percent from 4.2 percent, the median of 72 forecasts showed, matching the rate expected for the current quarter. The forecasts predict the economy will expand by at least 4 percent every quarter this year, something that hasn't happened since 1983, during President Ronald Reagan's first term. Consumer spending will rise to a 3.9 percent annual rate next quarter from 3.6 percent this quarter as the federal government sends out larger tax refunds, economists said. Faster growth will lower unemployment to an average of 5.4 percent in the year's final three months, when U.S. voters decide whether President George W. Bush gets a second term, according to the economists surveyed. ``Tax cuts and tax refunds should help front-load growth during the first half of the year,'' said William Quan, director of research at Mizuho Securities USA Inc. in Hoboken, New Jersey. He raised his second-quarter forecast to 4 percent from 3.3 percent. ``There is decent momentum in the economy right now. My concern is the second half of the year.'' The panel's forecast for all of 2004 was unchanged at 4.6 percent, which would be the fastest growth since 1984. Personal consumption expenditures, or consumer spending, will rise 3.8 percent, the economists predicted. The jobless rate will average 5.6 percent in the first half of the year, matching the rate reported for January and February, before falling to 5.5 percent in the third quarter and 5.4 percent in the final three months of the year. The U.S. economy added 21,000 jobs in February, the Labor Department said Friday, just one-sixth of the median economist forecast. The economy has shed 2.3 million jobs in three years, creating fodder for Bush critics including Massachusetts Senator John F. Kerry, the Democrat who is seeking to oust him in November's election. Kerry says Bush hasn't done enough to create jobs, while Bush is calling on Congress to make $1.7 billion in tax cuts permanent to ensure economic growth.
The tax cuts Bush won were made retroactive to January 2003, and the Internal Revenue Service said last week the average income tax refund is 4.4 percent higher this year.
Purchases at stores, automobile dealers and restaurants probably rose 0.6 percent during the month after falling 0.3 percent, according to the median estimate in a separate Bloomberg survey before the Commerce Department's release Thursday. First-time claims for unemployment insurance benefits last week fell to 343,000 from 345,000, according to the median of 36 estimates. The Labor Department will report is due Thursday. Inflation, as measured by the consumer price index, will rise at an average of 1.8 percent this year after rising 1.9 percent for the 12 months ended in December, the monthly poll found. With inflation declining, economists surveyed said Federal Reserve policy makers will be cautious about raising interest rates. The Fed's benchmark overnight bank lending rate is forecast to remain at a 45-year low of 1 percent through the first half of the year, the survey showed. ``Low core inflation gives the Federal Reserve system degrees of freedom to wait and be patient before having to raise interest rates,'' U.S. Treasury Secretary John Snow said during a speech in Washington yesterday. Fed Chairman Alan Greenspan and his colleagues had been ``extraordinarily disciplined in watching and not over-reacting,'' he said. The Bloomberg News survey was conducted from Feb. 27 through March 8. The forecasts for GDP growth in 2004 ranged from 3.4 percent to 5.6 percent.
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