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Economy in Brief

National Association For Business Economics Expects Positive Growth, Low Inflation & Higher Interest Rates
by Tom Moeller May 24, 2010


The National Association For Business Economics (NABE) indicated in its latest survey of 46 economists that economic growth would continue this year and next at a 3.2% rate. Though that expectation is slightly higher than the 3.1% growth forecasted in the February survey, it remains well short of the four-to-seven percent growth following past severe recessions.

Improved, but still subpar, growth in consumer spending is expected to bolster the economic recovery. Growth of 2.6% and 2.8% compares to the five percent growth after prior recessions.

Capital spending also is expected to improve -- and with more momentum -- than the consumer's rebound. The 11% gains in equipment spending this year and next are just shy of the higher double-digit gains following earlier recessions. The recovery in residential investment, while respectable at 12.6% in 2011, follows subpar growth this year and compares to the up to 41% gains after earlier, severe downturns.

As a result of the economic rebound, the unemployment rate is expected to fall. Here again, however, the half a percentage point decline is much smaller than the one-to-three point drops after earlier recessions. That implied level of continued economic slack is expected to leave core consumer price inflation roughly stable near 1.5%. Overall inflation remains relatively higher at 2.0% due to higher oil prices which is expected to average $88.80 per barrel of crude next year while interest rates rise modestly with the economic recovery.

Nat'l Assn. For Business Economics Outlook 2011 2010 2009
Real GDP (%) 3.2 3.2 -2.4
  Personal Consumption Expenditures 2.8 2.6 -0.6
  Capital Spending - Structures -1.1 -12.6 -19.7
  Capital Spending - Equipment & Software 11.0 10.7 -16.9
  Residential Investment 12.6 1.9 -20.4
Unemployment Rate 9.0 9.6 9.3
CPI 2.0 2.0 -0.3
  Price Index - PCE Less Food & Energy 1.7 1.3 1.4
10-Year Treasury Note 4.70 4.20 3.85
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