Recession ends by Q3? One more forecast version

The National Association of Business Economists (NABE) on Wednesday released a new survey that polled 45 professional forecasters. The study showed that the recession in the US will likely end soon with job losses continuing to increase and house prices keeping to plunge. Thus experts think that an economic recovery will be more moderate than those experienced in previous downturns.

The survey reported that about ? of the forecasters expect the economic crisis to come to its end by the third quarter of 2009. The remaining think that the turning point should be expected not earlier than either the last quarter of this year or the first three months of 2010. Still none of the experts believe that the recession, now in its 17th month, would extend beyond the first quarter of 2010.

More than 2/3 of the respondents in the NABE study predict home sales to bottom by the middle of the year with 60% of them expecting a floor for housing starts within the same time frame. While in February the economists forecast GDP falling 1.7 percent in the second quarter now they downgraded their growth forecasts as they see the economy contracting 1.8 percent in the second quarter, bringing the cumulative decline in gross domestic product (GDP) to 3.7 percent, the biggest since the 1957-58 recession.

The surveyed experts also expect that GDP will increase 1.2 percent in the second half with the economy to return to near trend growth of 2.7 percent in the fourth quarter of 2010, down from prior estimates of 3.1 percent.

While the pace of the job losses seems to decrease slightly still the unemployment rate rose to 8.9 percent in April and the respondents believe the rate to increase to 9.8 percent by the end of 2009 before easing to 9.3 percent by the end of 2010.

The survey shows that economic slowdown and gains in labor productivity will keep inflation pressures fairly muted this year. Such an environment along with high unemployment will mean that the Federal Reserve is likely to leave leaving its overnight lending rate steady at a record low 0-0.25 percent range until the second quarter of 2010.