Washington, October 4--Economists agree with Federal Reserve chief Alan Greenspan that the economy is regaining traction, with steady growth and low inflation in the cards through 2005, according to a quarterly survey of forecasts released Monday by the National Association for Business Economics.
"After a 'soft patch' in the spring quarter, the economy appeared to find firmer footing this summer," said Duncan Meldrum, NABE president and chief economist for Allentown, Pa.-based Air Products & Chemicals.
The sentiment echoes comments Greenspan made to the Congress early last month that the economy was improving.
The economists said that their forecast would not change measurably on the presidential election.
Eighty-two percent that they would make no change to their forecast if President Bush was seen as winning re-election, while 58 percent said that they would not alter their outlook if Democratic challenger Sen. John Kerry, D-Mass., were to be elected on Nov. 2.
The NABE expects real GDP growth of 3.7 percent in 2005. This inflation-adjusted reading is only down a tenth of a percentage point from the organization's last survey in May.
For 2004, GDP is expected to grow 4.3 percent, down from 4.7 percent growth forecast in the prior survey.
The NABE outlook is the consensus of a panel of 38 economists.
The economists expect strong job growth in coming quarters. They anticipate employment growth of 2.0 percent on a year-on-year basis for 2005, which would correspond to payroll growth of almost 220,000 per month.
Despite the healthy implied gains in payrolls, the unemployment rate is projected to slip only to 5.3 percent next year from 5.5 percent in 2004 because of a rise in labor-force participation.
This year's spike in energy prices has led to higher forecasts for inflation, but "importantly, the panel sees the bulge in prices to be ... mostly behind us," the survey found.
The consumer price index, tracking inflation at the retail level, is expected to rise 3.1 percent year over year in 2004, an increase of 0.6 percent from the last survey in May.
Core CPI is expected to average just 1.7 percent from the third quarter of 2004 through the end of 2005, down from a forecast of 2.0 percent in the May survey.
The cost of a barrel of oil is expected to stand at $40 as of the end of the year and then fall to $35 at the end of 2005, the panel said.
The yield curve is expected to steepen through the remainder of the year and into 2005, with the 10-year Treasury note's yield expected to reach 5.5 percent toward the end of next year.
