US business economists see recovery by H2 2009

06 October 2008 19:35  [Source: ICIS news]

WASHINGTON (ICIS news)--The US is already in a recession or will be by year end, but the federal bailout plan will blunt the decline, and the country’s economy will return to normal growth by the second half of 2009, leading analysts said on Monday.

 

The National Association of Business Economists (NABE) said in its latest outlook that the emergency financial rescue plan approved by Congress and signed into law by President George Bush on Friday “will address credit-market stresses [and] blunt much of the economic decline that might otherwise develop”.

 

The association, whose members include 2,500 economists representing more than 1,500 businesses, said that “business economists have become more negative on the economic outlook for the next several quarters as a result of the tightness in credit markets and weakness in consumer spending”.

 

As a consequence, NABE expects US economic growth to stall in the fourth quarter this year - with virtually no gain in gross domestic product (GDP) for the final three months of 2008 - before nosing up again in the first quarter 2009 with a still anaemic 1.3% annualised growth rate.

 

The NABE outlook was issued as US federal financial leaders sought to calm markets amid plunging stock values worldwide.

 

The business economists anticipate that growth rates will improve steadily through the next three quarters of 2009, reaching annualised rates of 2.3% GDP growth in the second quarter, 2.7% in the third and normal or “trend-like” growth of 3% in the fourth.

 

An annual improvement of around 3% in gross domestic production is considered normal or trend growth for a healthy national economy.

 

However, the business economists cautioned, “If financial conditions fail to improve quickly, near-term economic prospects could deteriorate markedly”.

 

“Still, the NABE panel expects that lower oil prices, a bottoming out in home prices and a better functioning of financial markets should enable the economy to resume trend-like growth by the second half of 2009,” the association said.

 

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By: Joe Kamalick
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