Poll: Economists more upbeat despite deficit woes

By DAVE CARPENTER AP Business Writer

CHICAGO (AP) - Economists forecast the pace of U.S. growth to pick up in the year ahead as consumers and businesses alike accelerate spending, according to a new survey.

The assessment by leading forecasters is set to be released Monday by The National Association for Business Economics. It finds them more bullish than when the survey was last surveyed in February, with a majority expecting the economy's performance to exceed the long-term norm in 2010 and 2011.

The outlook amounts to an encouraging report card on the economy at nearly the one-year mark of the recovery, which the experts date to June 2009 when the recession hit bottom.

"Although risks involving Europe have recently escalated, the outlook in this country has improved in most respects," said Lynn Reaser, the group's president and chief economist at Point Loma Nazarene University. "Growth prospects are stronger, unemployment and inflation are lower, and worries relating to consumer retrenchment and domestic financial headwinds have diminished."

While the economy is in "reasonably good shape," she said, forecasters are extremely concerned about the impact of large federal deficits in the future.

The panel of forecasters boosted its expectations for growth in 2010 to 3.2 percent real gross domestic product, up from 3.1 percent in its February outlook. It also pegged the 2011 growth rate at 3.2 percent.

Household spending, while still lagging the overall economy, is still expected to grow significantly this year. The forecasters attribute part of that to consumers being less thrifty, with the saving rate for 2010 seen dropping to 3.4 percent from the 4.6 percent they predicted just three months ago.

Business investment also is expected to fuel the recovery. The economists expect higher operating rates and rising corporate profits boosting companies' spending on equipment and software, while retailers restock inventory.

Unemployment is forecast to decline to 9.4 percent by year's end and 8.5 percent by the end of 2011.

Forecasters have scaled back their expectations for the housing growth after setbacks to the setback earlier this year. But 65 percent of survey respondents said last year's lows in home sales and home prices will not be retested.

Inflation is expected to remain low in the near term, in line with the outlook from Federal Reserve Chairman Ben Bernanke and his colleagues. But panelists showed increasing concern about higher inflation over the next five years.

The NABE survey of 46 professional forecasters was taken April 27 to May 7.