The NABE sees the end of the recession on the horizon, but is concerned that the recovery will be slow at best:
“While the overall tone remains soft, there are emerging signs that the economy is stabilizing,” according to NABE’s latest survey and its president, Chris Varvares, who is also president of Macroeconomic Advisers. “The survey found that business economists look for the recession to end soon, but that the economic recovery is likely to be considerably more moderate than those typically experienced following steep declines. Moreover, despite encouraging signs seen in the last several weeks, the NABE panel downgraded the economic outlook for the next several quarters, compared with the previous survey,” he added. According to the survey, the key downside risks remain continued large job losses, no improvement in credit conditions, and further sharp declines in home values. These same forces are causing consumers to remain cautious, a feature that NABE panelists think is here to stay. Following a sharp 6.1% (annual rate) contraction in the first quarter of this year and another 1.8% drop in the second quarter, NABE forecasters expect real GDP to rise at a subpar 1.2% rate in the second half. This would result in a hefty 1.2% decline in 2009 (on a fourth-quarter over fourth-quarter basis), on the heels of a 0.8% decline in 2008. The unemployment rate is forecast to rise to 9.8% by year-end; and inflation is expected to moderate, as economic slack builds and as oil prices are forecast to remain relatively depressed. “The good news is that the NABE panel expects economic growth to turn positive in the second half of this year, with the pace of job losses narrowing sharply over the remainder of this year and employment turning up in early 2010,” Mr. Varvares said.