US recession may soon end

The US recession will probably end in the third quarter, a survey of business economists showed, even as rising joblessness indicates the recovery will be weaker than previously estimated.

The world’s largest economy will begin to expand next quarter, according to 74 per cent of economists in a National Association for Business Economics survey. Compared with NABE’s February poll, growth will be slower and unemployment will be higher in the second half of this year and through 2010.

Government stimulus spending and Federal Reserve efforts to thaw credit markets are helping pull the economy out of the worst slump in half a century, the survey said. While housing is stabilising, the economists predicted consumer spending will be restrained by a deteriorating labor market as job losses continue for the rest of the year.

 

“There are emerging signs that the economy is stabilising,” Chris Varvares, president of the group and of Macroeconomic Advisers LLC in St Louis, said in a statement. Still, the recovery may be “considerably more moderate than those typically experienced following steep declines,” he said.

The economy will shrink at a 1.8 per cent annual rate from April to June, and then grow at a 0.7 per cent pace in the next three months, the survey showed. Growth will accelerate to a 1.8 per cent rate by the final quarter.

Consumer spending, which accounts for about 70 per cent of the economy, may fall 0.4 per cent this year, compared with a 1.3 per cent drop forecast in the prior poll. Purchases will increase 2.1 per cent next year, less than estimated in February.

The NABE survey, based on the median forecast of a panel of 45 economists, was conducted from April 27 to May 11.