The almost one year old US recovery, started from the trough of June 2009, will be stronger than previously estimated, a survey by National Association for Business Economics said Monday.
The NABE panelists raised their growth forecast for 2010 to 3.2% for real GDP from 3.1% estimated in February even as concerns over the spread of the European debt crisis deepened across the globe. The panel also expects economy to grow at the same pace in 2011. The economy's potential rate of growth is estimated at 2.8% over the next five-year period.
"Although risks involving Europe have recently escalated, the outlook in this country has improved in most respects," said NABE President Lynn Reaser, chief economist at Point Loma Nazarene University.
"The economy is in reasonably good shape as the recovery approaches its first anniversary, but forecasters remain 'extremely' concerned about large federal deficits going forward."
The survey taken from April 27 to May 7 showed that traditional cyclical forces of pent up demand and inventory building are becoming increasingly relevant. Though financial headwinds will temper the pace of growth, concerns about the credit conditions have eased somewhat from the February survey.
The survey stressed that inflationary pressures may build up gradually. However, they assured that a "stagnation" scenario, that combines slow growth with high inflation, is "highly unlikely".
Job gains are expected to remain robust throughout the forecast horizon as output gains remain steady. The jobless rate is likely to decline to 9.4% by this year-end and to 8.5% by the end of 2011, though the rate remained high by historical standards. The panelists had ranked unemployment as their second greatest "concern".
In addition, NABE panelists raised their estimate of the unemployment rate consistent with full employment to 5.5% from 5% estimated earlier.
The poll pointed out that the dollar will retain much of its gains against euro and trade-weighted basket of foreign currencies. With respect to the risk of a Greek default, 51% among those polled believe that a default will not occur, while 12% expect outright default within the next twelve months.
However, 37% expect default after some short-term maneuvering only buys time.
It should be noted that these responses were collected prior to the May 9 announcement by the EU, IMF, and ECB of the program to address the Greek crisis.
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May 15, 2026 15:25 ET Apart from the confirmation of Kevin Warsh as the next Fed chair, the main news on the economics front this week included key price data from the U.S. and the first quarter economic growth figures from major economies. Both consumer prices and producer costs have started to reflect the effect of supply shocks due to the Middle East conflict. In Europe, GDP data was in focus, while inflation data from China dominated the news flow in Asia.