US ’05 Outlook: good, solid economic growth forecast

16 December 2004 19:08  [Source: ICIS news]

WASHINGTON (CNI)--Top US government and private economists said Thursday they anticipate solid if moderate US economic growth in 2005 with good job growth, low inflation and low interest rates that will be “good for businesses across the economy.”

 

Kathleen Cooper, undersecretary for economic affairs at the US Department of Commerce (DoC), told a meeting of economists and business leaders here today that the US economic expansion will continue through 2005, although she expects the rate of growth next year will moderate to around 3.5% compared with the 4%-plus growth rate that is likely to be this year’s final measure of economic expansion.

 

“We will see good, solid growth next year,” Cooper told an economic meeting at the US Chamber of Commerce, a private trade group not affiliated with the US government.

 

“Growth probably will slow somewhat next year to around 3.5%,” she said, “but it will be a solid improvement with underlying and continuing low inflation rates of around 2.5% and unemployment falling to about 5%.” US economic growth next year, she added, will be “good for businesses across the economy.”

 

Cooper, the top economist at DoC and formerly chief economist at ExxonMobil, said US job growth will continue to improve “throughout the year.” The “lion’s share” of those new jobs, she said, will be “good jobs,” defined as having wages above the government-set minimum wage.

 

Daniel Laufenberg, vice president and chief economist at American Express Financial Corp (AEFC), echoed Cooper’s forecast, saying he too expects US economic growth next year of 3.5% to 3.7%. Laufenberg, whose role at Minneapolis, Minnesota-based AEFC includes close monitoring of consumer sentiment, said he expects improving jobs growth and wage gains in the new year, “and this will give consumers both the means and the confidence to continue to spend.” Consumer spending is the principal driving engine of the US economy.

 

Nariman Behravesh, chief global economist and executive vice president at consulting firm Global Insight in Boston, Massachusetts, predicted 4% growth for the US next year, slowing from what he expects will be a final tally of 5% growth for this year. But Behravesh also agreed that the US expansion will continue through 2005 despite higher oil costs, slight increases in interest rates and a slowing of the Chinese market.

 

He said China’s economic growth rate likely will moderate to 7% next year from its current 9% growth, “but we see no ‘hard landing’ for the Chinese economy and continuing strong Chinese demand for commodities.”

 

Behravesh said that while economic expansion will continue in much of Asia and in Latin America, economic performance next year in the European Union (EU) “will continue to be disappointing” and one reason for the reduced growth rate expected for the US economy.

By: Joe Kamalick
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