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Survey: Limited hiring, consumer spending will hold back economic recovery

WASHINGTON — The economy will fail to strengthen in 2011 as companies limit hiring and consumers curb spending, a survey of economists forecasts.

Gross domestic product will increase 2.6 percent next year after growing 2.7 percent in 2010, according to the median forecast of 51 economists surveyed by the National Association for Business Economics from Oct. 21 through Nov. 4.

"Growth is expected to be moderate," said Richard Wobbekind, president of the group and associate dean of the Leeds School of Business at the University of Colorado in Boulder. "Panelists remain concerned about high levels of federal debt, a continuing high level of unemployment, increased business regulation and rising commodity prices."

A diminishing need to replenish inventories, the winding down of government stimulus and households' drive to pay off debt will restrain growth, the survey showed.

Employment next year will climb by 136,000 a month on average, down from the 153,000 they projected in October, the survey showed.

This month's canvass was completed before the Labor Department reported on Nov. 5 that employers added 151,000 workers to payrolls last month, beating the median estimate of economists surveyed by Bloomberg News.

The unemployment rate will be 9.4 percent or higher through the middle of 2011 before dropping to 9.2 percent by the end of next year, according to economists surveyed.

Consumer spending will expand 1.7 percent in 2010 and 2.4 percent in 2011, the survey showed. Median projections in October for this year and next were 1.5 and 2.3 percent, respectively.

Respondents also said inflation in 2011 will remain below the Federal Reserve's estimates. Economists forecast the central bank's preferred inflation gauge, the personal consumption expenditures price index excluding food and energy, will rise 1.3 percent next year after a 1.1 percent gain in 2010.

Fed policymakers have a long-run inflation forecast of 1.7 to 2 percent, the level they see as consistent with achieving legislative mandates for maximum employment and stable prices.

About one-third of those surveyed said a Fed decision to buy another $600 billion in government debt through June could diminish the risk of deflation, and another third said the action could increase the risk of "undesirable" inflation.

The biggest threat to the economy was "excessive federal debt," according to those surveyed, exceeding concern over unemployment and either inflation or deflation, the report said.

The deficit will narrow to $1.1 trillion in 2011 from $1.3 trillion this year, according to the median forecast.

Survey: Limited hiring, consumer spending will hold back economic recovery 11/22/10 [Last modified: Monday, November 7, 2011 1:23pm]
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