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Economists cut U.S. growth estimates because of fuel prices
NEW YORK — Economists are dialing back their expectations for U.S. economic growth this year.
A survey by the National Association for Business Economics predicts GDP will grow 2.8% this year — down from the group's February prediction that it would grow 3.3%. Their outlook for consumer spending and the housing market also weakened, in part because they expect oil prices to remain above $100 a barrel through 2012.
In a survey the NABE released Monday, 41 economists also said they "remain highly concerned" about the growing federal deficit, and said growth the first three months of the year had been weaker than expected.
The economists' predictions reflect the jitteriness of a public that is still recovering from the financial crisis and now being squeezed by rising prices for gasoline, groceries and other household items. Manufacturers are paying more for the raw materials they need to make and transport their products and saying they have no choice but to pass along the price increases to customers.
The NABE's outlook survey is released every quarter. For this report, the poll was conducted April 13 to May 1. For the last report, in February, the economists were polled Jan. 25 to Feb. 9. Since then, unrest has spread in the Middle East and North Africa, which has played a role in the higher prices for raw materials and gas.
In addition to lowering their outlook for 2011 growth in GDP, the economists lowered predictions for consumer spending growth this year (2.8%, down from 3.2%), and housing starts (610,000, down from 660,000). They also expect housing prices to fall 1.5%, after saying earlier they would rise 0.4%.
Oil will average $105 per barrel this year, the economists predict, up from $93 in the last survey. They expect oil prices to remain elevated at $103 a barrel through 2012.
Oil closed at $99.65 a barrel on Friday. A gallon of regular gas costs an average $3.96 a gallon, according to AAA.
Business spending was the bright spot in the NABE predictions. The economists expect spending on business equipment and software to rise 11.9% this year, partly because of pent-up demand after businesses cut spending during the recession. Corporate profits will rise 8.5%, they predict.