“Economists are more optimistic about the recovery than they were just a few months ago, significantly upgrading their forecasts for 2011 as consumers open their wallets.
When asked to predict, nine of 10 economists said they’re more optimistic than three months ago, according to a USA TODAY survey of 46 economists conducted Jan. 13-19.
They expect the economy to grow at an annual rate of 3.2% to 3.4% each quarter this year. That’s up from quarterly median forecasts of 2.5% to 3.3% in an October survey.
“This growth is now becoming self-reinforcing,” says Mark Zandi, chief economist of Moody’s Analytics. “Businesses are going to take their stronger sales and begin to hire more aggressively, generate more income, and we’re off and running.”
Zandi expects the economy to grow 4.4% this year. That’s better than last year’s estimated 3% growth, but well short of the 5% to 7% expansion that followed previous severe recessions.
The economists say the more robust growth will help cut the unemployment rate to 9% by year’s end from 9.4% in December. They expect employers to add 200,000 jobs a month by the second half of the year, more than double last year’s rate.
An AP story points out a somewhat less traditional economic indicator: Sales of iPads to business are booming, indicating a new willingness to start investing:
“Splurging on $500 iPads is a sign that the business cycle is starting to turn and that companies are starting to spend a record amount of cash they’ve accumulated. If the trend is real, companies will do what consumers haven’t — spark a strong economic recovery. That could push the Standard & Poor’s 500 index to its third straight year of double-digit percentage gains. The last time that happened: the tech-boom days of the late 1990s.
“”You’re going to see a bigger commitment to growth this year because companies have underspent for quite some time,” says Bill Stone, chief investment strategist at PNC Asset Management.
Financial, technology and energy companies are the most likely to benefit from business spending, says David Bianco, a market strategist at Bank of America. Each group is up about 3 percent this year, nearly one percentage point ahead of the overall S&P 500. Those three groups account for nearly half of index’s value….
“Consumers don’t have the income growth to sustain a more rapid pace of spending,” says Jeffrey Kleintop, a market strategist at LPL Financial. Instead, he says, businesses spending will eventually lead to a pickup in the jobs market.”
Again, we have a long way to go to dig ourselves out of this canyon, and many Americans will never recover either the earning power or the household wealth that they’ve lost in the last few years. But getting better is a whole lot better than getting worse.
– Jay Bookman