Bad news for Democrats, it looks like the economy and the stock market are turning around just in time for next years election. We'll have to see how the real numbers stack up against these predicitions.
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Experts predict quarterly growth
By Sue Kirchhoff and Barbara Hansen, USA TODAY
WASHINGTON — The U.S. economy is thought to have roared ahead at a 5.4% annual rate in the third quarter — the fastest pace since the fall of 1999 — according to the median forecast of 60 economists surveyed by USA TODAY.
The upbeat survey, conducted Oct. 3-8, predicts the U.S. economy, which grew at a 3.3% annual rate in the second quarter, will expand at a strong 4% clip in the fourth quarter and 3.8% in all of 2004.(Charts: More economic forecasts)
However, even with the faster growth, the weak job market should recover only gradually.
Three-fourths of the economists surveyed expect hiring to pick up by early next year to a rate of 100,000 or more net new jobs a month.
But the unemployment rate is forecast to hover in the 5.8% to 6% range for much of next year. The nation's jobless rate was 6.1% in September.
None of the economists expects the Federal Reserve to raise interest rates, now at a 45-year low of 1%, when it meets Oct. 28. More than 50% don't expect a rate increase until sometime in the second half of 2004, and 18% say the Fed will hold off until 2005 or later.
Robert Goodman of Putnam Investments was one of the more upbeat forecasters, predicting the economy grew at a 5.8% pace in the third quarter.
The government releases its preliminary estimate for third-quarter gross domestic product on Oct. 30.
The quarterly predictions could vary based on such factors as trade and business inventories, Goodman says, but the economy has clearly picked up — growing 2.5% from the second quarter of 2002 to the second quarter of 2003.
"There's an acceleration going on," Goodman says.
Rich Yamarone of Argus Research is less optimistic, expecting economic growth to be less than 4% in the third quarter.
Even though he expects healthy consumer spending, thanks to recent tax cuts, he warns there will not be a repeat of the enormous defense spending surge that helped fuel second-quarter growth.
"(Federal spending and tax cuts) have been masking the underlying tone," Yamarone says. "The economy is in a little bit of a fragile state, though far from recession."
Consumer inflation should remain muted, running 2.1% year over year in the fourth quarter of 2003 and 1.7% in 2004. After-tax corporate profits are expected to rise 15% in the third quarter on a year-over-year basis, and an even stronger 18% in the fourth quarter. Business spending, the missing ingredient in the rebound, should rise at an 8.5% seasonally adjusted annual rate in the third quarter of 2003 and average 8.4% in 2004.
Some are more cautious, saying that despite higher profits, there are few tangible signs so far of a big pickup in business spending. Rajeev Dhawan of Georgia State University doesn't expect business spending growth to rise above 8% until the second half of 2004.
The economists predict mortgage rates will remain in the 6.1% to 6.5% range through the third quarter of next year, ensuring the housing market will remain strong.
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