The U.S. economy will grow less than previously estimated through 2012, reflecting a slump in confidence, limited consumer spending and a struggling housing market, a survey showed.
Gross domestic product in the world’s largest economy will expand 1.7 percent this year, less than the May forecast of 2.8 percent, according to results of a survey by the National Association for Business Economics issued today in Washington. Growth in 2012 will average 2.3 percent after a previous projection of 3.2 percent.
Some 54 percent of respondents lowered their growth forecasts because they said the legislation stemming from the debt-ceiling debate will fail to reduce the long-term budget deficit. Unemployment projected to stay above 8.5 percent until late next year and Europe’s debt crisis were also among panelists’ top concerns.
“A wide variety of factors were seen as restraining growth, including low consumer and business confidence, uncertainty about future economic policies, a tepid housing market, and financial headwinds,” Gene Huang, NABE president- elect and chief economist at FedEx Corp., said in a statement.
Thirty percent of respondents, up from 11 percent in May, view the recovery as “subpar, with severe wealth losses and onerous debt burdens.” Some 24 percent, down from 34 percent in the prior survey, said the recovery will continue at a “moderate” pace, while 13 percent, up from 3 percent, said the economy will slide into a recession.
Consumer spending, which accounts for about 70 percent of the economy, will increase 2.1 percent this year and next, down from the previous forecast of 2.8 percent, according to the survey. Auto sales will total 12.6 million this year, according to the survey.
Spending on home construction will drop 1.6 percent through the fourth quarter, compared with a prior forecast for a 0.9 percent increase. Home prices, as measured by the Federal Housing Finance Agency’s index, will decline 2 percent in the fourth quarter from the same three months last year.
Payrolls will increase 124,100 a month on average this year, down from the prior estimate of 190,300 workers, the survey showed. Unemployment will average 9 percent in 2011, higher than the 8.7 percent projection in the prior survey.
While it may be a source of strength for the economy, the economists also lowered their estimates for business investment in equipment and software by 2.7 percentage points. They project it will expand 9.2 percent in the fourth quarter from a year earlier.
Cost of Living
The cost of living in the U.S., as measured by the consumer-price index, will rise 3.1 percent in the 12 months ended in December, up from 2.8 percent forecast in the last survey. The Federal Reserve’s preferred inflation measure, which excludes food and energy, will advance 1.8 percent by the end of the year, compared with the previous estimate of 1.6 percent.
Fifty-two NABE members responded to the survey, conducted Aug. 10-24. The National Association for Business Economics, founded in 1959, is the professional organization for people who use economics in their work.