The US economy is set for a strong rebound in the first quarter of 2006, shaking off the hurricane-related weakness of the fourth quarter, a survey of business economists showed. The survey of the National Association of Business Economists called for the economy to expand at a robust 4.5 percent pace in the current quarter -- the fastest since 2003 -- after a disappointing 1.1 percent annualized rate in the fourth quarter.
"The NABE panel sees the economy roaring back in early 2006 following the fourth quarter's tepid 1.1 percent growth," said Stuart Hoffman, NABE president and chief economist at PNC Financial Services Group.
"Our forecasters expect the economy to shake off the effects of last years hurricanes and surging oil price."
The report based on a survey of 53 economists projected the overall pace of growth for 2006 at 3.3 percent.
This should be strong enough to allow the Federal Reserve to lift its base interest rate to 5.0 percent, the economists conclude.
The NABE panel saw a somewhat uneven pace of growth, with a deceleration in the second half of 2006. They called for an average four percent growth pace in the first half and a three percent expansion in the second half.
In a first look at 2007, the NABE panel expected growth to moderate slightly to 3.1 percent, and the unemployment rate to edge higher, averaging 4.9 percent after a projected 4.8 percent average in 2006.
The panel expects "core" consumer price inflation to edge up to 2.4 percent.
"The NABE panel sees high and rising energy costs as the biggest risk to the expansion," the organization said in a statement. Rising interest rates also had a high rank, followed closely by declining home prices.
Despite these risks, the panel sees only a 15 percent chance the expansion will end in 2006 and 25 percent probability that 2007 will see the cyclical peak in economic activity.
The NABE panel expects payroll employment growth of 2.1 million jobs in 2006 and 1.8 million in 2007, which is just enough to keep the unemployment rate steady at current levels.
The NABE consensus revised upward its expectations for oil prices to nearly 59 dollars a barrel at the end of this year, up from 53 dollars expected in November's survey.
