Blue Chip Poll Cuts Forecasts for Economy
Aug 10 12:04am ET
WASHINGTON (Reuters) - The U.S. economy will be slow to emerge from its slump in coming months as falling profits prompt business cost-cutting and consumers remain cautious, the closely watched Blue Chip survey said on Friday.
Experts polled for the Blue Chip Economic Indicators August newsletter reduced their forecasts for growth in the second half of 2001 compared to those in the last survey in July.
But most of the analysts continued to believe the U.S. economy would avoid a full-blown recession.
"The U.S. economy remains stuck in its worst slump in a decade and data released over the past month continued to signal a 'one step forward, two steps back' performance in business activity," the Kansas City, Mo.-based newsletter said.
"There are, nonetheless, some indications that the worst news is behind us," Blue Chip added.
In August, the Blue Chip economists projected a 1.7 percent gain in third quarter U.S. gross domestic product, down from a month ago when the group was expecting a growth rate of 2 percent. For the fourth quarter, the analysts ratcheted down their growth forecast to 2.8 percent from the 3 percent forecast in July.
The U.S. economy, which has gone for an unprecedented 10 years without a recession, has been mired in a slowdown since the middle of last year.
On July 27, the Commerce Department reported that the U.S. GDP inched up by a mere 0.7 percent in the second quarter of this year, its weakest performance in eight years.
Although that was an anemic growth rate, the number implied that at least through the end of July, the economy had managed to escape a recession, which economists loosely define as two straight quarters of falling GDP.
Blue Chip said six interest-rate cuts by the Federal Reserve this year and newly enacted tax cuts would help push the economy along in the second half of this year.
But it said a darkening economic outlook in overseas economies would offset some of the impact from the monetary and fiscal medicine.
"The better performance in the second half of this year is premised on a near-term end to the inventory correction, a gradual pickup in consumer demand and stabilization of business investment by Q4," Blue Chip said.
Only 15 percent of the panel members thought the U.S. economy was currently in a recession. That was up very slightly from 13 percent in the July survey. |
