RTTNews - The U.S. economy is set for a modest rebound in the second half of this year, marking an end to recession, forecasters predicted Wednesday.

In a survey report, the National Association for Business Economics or NABE said forecasters expect real GDP to rise at a sub par 1.2% rate in the second half, after a sharp 6.1% annual rate of contraction in the first quarter of this year and another 1.8% drop in the second quarter.

This is expected to result in a massive 1.2% decline in the full year GDP, on a fourth-quarter over fourth-quarter basis, much severe than the 0.8% slump witnessed in 2008. Thereafter, growth is forecast to return to near its historical trend in 2010 with real GDP rising 2.7% for the year.

While the overall tone remains soft, there are emerging signs that the economy is stabilizing, NABE president, Chris Varvares said in a statement. He is also the president of Macroeconomic Advisers.

Though business economists expect the recession to end soon, the economic recovery is likely to be considerably more moderate than those typically experienced following steep declines, he added.

The latest survey found that the near-term weakness in the economy is largely due to a sharp retrenchment in business investment. Going forward, increased government spending is expected to underpin the economy, as the only major expenditure area posting positive growth in 2009.

Despite encouraging signs seen in the last several weeks, the NABE panel downgraded the economic outlook for the next several quarters, compared with the previous survey, Varvares said.

Further, the survey found that the key downside risks remain continued large job losses, no improvement in credit conditions, and further sharp declines in home values. These same forces are causing consumers to remain cautious, a feature that NABE panelists think is here to stay.

According to the survey, the jobless rate is expected to climb to 9.8% by year-end, while the pace of job losses is forecast to narrow sharply over the rest of the year. Meanwhile, employment is seen turning up in early 2010.

Forecasters also expect inflation to moderate as economic slack builds and as oil prices are forecast to remain relatively depressed.

The NABE May 2009 Outlook survey was carried out among a panel of 45 professional forecasters between April 27 and May 11.

For comments and feedback: contact editorial@rttnews.com