Economists Predict Growth in 2011

The economists now see stronger expansion in the first half of 2011, with growth picking up speed as the year progresses. Courtesy of 123Royalty Free

Economists have grown more optimistic about the outlook for U.S. growth next year, predicting the expansion will accelerate as 2011 progresses, according to the latest forecasting survey.

The 55 respondents raised their growth projections for gross domestic product for nearly every period, including the current quarter. On average, the economists now predict GDP will grow 2.6 percent in the current quarter at a seasonally adjusted annual rate, up from the 2.4 percent growth they projected in last month's survey. The economy grew 2.5 percent in the third quarter.

For the year, they expect GDP will rise 3 percent. Meanwhile, they have reduced the odds of a double-dip recession to 15 percent, the lowest average forecast of the year, from 22 percent in September survey.

The majority of the respondents said there's a better chance the economy in 2011 will outperform their forecasts than that it will underperform. Thirty-five economists said the risks to their forecasts are more to the upside; 14 said the risk was to the downside.

Data on trade, retail sales, consumer sentiment and manufacturing have been looking better. Economists also were generally encouraged by news from Washington on a tax-cut compromise that included an unexpected temporary reduction in payroll taxes in addition an extension of the Bush-era tax cuts.

The survey was conducted from Dec. 3 to 8, so not all of the forecasts take the tentative tax deal into account. Strong data on exports also caused some economists to push up forecasts. Macroeconomic Advisers, for example, raised their fourth-quarter GDP tracking forecast by 0.3 percentage point to 2.3 percent.

- Courtesy of Wall Street Journal