The US economy will lose steam as the year progresses but will not slide back into recession, even though unemployment is unlikely to fall significantly, according to a survey released on Saturday.

The Blue Chip Economic Indicators survey of private forecasters found analysts increasingly glum about the outlook. They now see the economy expanding just 3.1 per cent in 2010, down from 3.3 per cent in the June poll.

They do not, however, envisage a renewed period of contraction, which has been widely debated in financial markets in recent weeks.

“Our panellists think talk of a double-dip recession is overblown absent a new, major shock,” the group said in its report.

Some analysts worry such a disruption might come from Europe, where concerns about high debt levels have made the banking sector jittery about lending.

The report’s findings highlight the risks of a sputtering recovery amid lingering softness in housing, suggesting the unemployment rate will end the year at 9.4 per cent, barely down from the current 9.5 per cent rate.

“For a second straight month the number of panellists that lowered their forecasts of nominal GDP growth and inflation exceeded those that raised their forecasts by a significant margin,” the report said.

“In the past, such a development has often suggested further erosion in consensus forecasts during subsequent survey.”

Along with more moderate growth, inflation is expected to remain extremely tame. Forecasters are looking for a 0.9 per cent increase in prices for 2010 as a whole, the smallest rise since 1950.

Source: Business Standard

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