The National Association for Business Economics released a latest survey report after consulting 46 economists. The report indicates that the economic growth in the United States will be stronger this year and next, the job market will be healthier, and inflation will remain moderate. Additionally, banks will ease lending conditions for businesses, especially small enterprises. The U.S. economy is expected to grow by 3.2% in 2010, slightly higher than the 3.1% predicted in February; the growth rate for 2011 is also expected to remain at 3.2%.
The report states that compared to the survey conducted in February, economists are optimistic about the momentum of U.S. economic growth for this year and next. They believe that the increase in consumer spending will be the biggest driver of economic growth, with the average savings rate for Americans expected to be around 3.4% in 2010, significantly lower than the 4.6% anticipated three months ago. Clearly, the American public is no longer as frugal as during the recession.
The report suggests that the adverse factors currently affecting the U.S. financial markets have significantly diminished. Despite some recent turmoil caused by Greece and other European countries, corporate earnings are improving, consumer spending is increasing, and overall business confidence is strengthening. Consequently, companies are increasing their spending on technology, software, and equipment, and are also building up their inventories. Corporate profits are expected to grow by 20% in 2010 and further increase by 7% in 2011, both slightly better than the typical earnings situation during an economic recovery. Driven by strong corporate profit growth, the stock market is also expected to rebound robustly. Although the U.S. stock market has already seen significant gains over the past year, there remains optimism for further increases.
National Association for Business Economics President Russell pointed out that since the association's survey, although the turmoil in European finance has increased and uncertainties regarding financial market regulations in the U.S. and abroad have pressured the stock market, once the situation in the financial markets stabilizes, the fundamentals of the U.S. economy will become the dominant factor in the market. People will see the stock market rise again, with the S&P 500 index expected to increase by 11%.
The report also notes that economists are more optimistic about the recovery prospects of the U.S. job market, predicting that the unemployment rate will decline from the current 9.9% to 9.4% by the end of this year, and further to 8.5% by the end of 2011. This expectation is roughly in line with the Federal Reserve's forecast. In April, the Federal Reserve predicted that the unemployment rate would fall to between 9.1% and 9.5% by the fourth quarter of 2010, and to 8.3% by the end of 2011.
U.S. companies previously believed that the recession would last a long time, leading to large-scale layoffs. Now, companies need to increase their workforce, at least by adding temporary employees. Some manufacturing sectors have already begun to rehire previously laid-off workers. In addition, the retail, service, and even construction industries are expected to increase hiring. Data released by the U.S. Department of Labor on the 20th of this month shows that the employment situation has improved in 42 states and the District of Columbia over the past three months, with an increase in employment rates, and many states have begun to emerge from the shadow of the recession.
However, economists are surprised by the slow pace of recovery in the current U.S. real estate market. In the February survey, they generally believed that the growth of the real estate market would outpace the overall economic growth rate. In fact, the recovery prospects for the real estate market have not been as rapid as they had imagined. Nevertheless, they still believe that the trend of recovery in the real estate market has not changed, with housing investment and new housing starts expected to continue to rise, and home sales and housing prices should not test last year's lows again. The real estate industry may play a more supportive role in the U.S. economic recovery.