Blue Chip Survey: 2002 GDP Forecast At 1%, 2003 GDP 3.4%
10 Jan 00:16
WASHINGTON -(Dow Jones)- Top analysts are nearly evenly divided about whether
the Federal Reserve will cut interest rates again at the end of this month, but
most believe that the recession will end by the end of the first quarter,
according to the most recent Blue Chip Economic Indicators survey released
Thursday.
The monthly survey of more than 50 leading business economists also showed
that the consensus of those polled expects the economy to contract 1.0% in the
fourth quarter of 2001, versus the 1.3% contraction analysts had predicted last
month.
"The improvement largely results from the belief that personal consumption
held up better in Q4 than originally believed," the survey stated.
The Commerce Department will release fourth-quarter growth numbers Jan. 30.
Economists look for gross domestic product growth to pick up to a 0.7% pace
in the first quarter of 2002, 2.6% in the second quarter, 3.6% in the third
quarter and 3.8% in the fourth quarter. The consensus forecast of those polled
calls for the economy to expand at a 1.0% clip in 2002 and 3.4% in 2003.
The economic rebound will unfold in three phases, analysts said.
"First, the inventory cycle will begin to turn in the current quarter and add
significantly to growth over the year. Second, personal consumption will begin
to strengthen this spring following a modest contraction in Q1. The third and
final phase assumes a second half revival in business investment," the survey
states.
More than 90% of the panel members now say the recession will end before the
end of the first quarter. However, it remains unclear whether the coming
rebound in economic activity will be "vigorous, sluggish, or something in
between," the survey says.
While analysts polled are evenly split on whether the Fed will cut rates
again at its upcoming Jan. 29-30 monetary policy meeting, the consensus of
those polled see the Federal funds rate ending the year at 2.56%, up from its
current 1.75%, the survey said.
Most analysts in a recent Dow Jones/CNBC survey expect the Fed to cut rates
by another quarter point later this month, bringing the Federal funds rate to
1.50% from its current 40-year low of 1.75%.
The survey of 23 primary dealers Friday found that 18 expect the Federal Open
Market Committee, the Fed's rate-setting arm, to implement a final
25-basis-point rate cut at the January meeting.
The Fed has slashed rates 11 times since the start of 2001, but most analysts
expect the Fed to gradually begin lifting rates in the second half of the year
as the economy begins to pick up steam.
-By Deborah Lagomarsino, Dow Jones Newswires; 202 862 9255;
deborah.lagomarsino@dowjones.com
(This story was originally published by Dow Jones Newswires)
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