Recent evidence a U.S. economic recovery may be gaining traction has led economists to raise their forecasts for the pace of growth in the world's largest economy, according to a Reuters poll released on Wednesday.
The poll of around 80 economists suggested U.S. gross domestic product will rise by 3.0 percent on an annualized basis in 2011, up from 2.7 percent in a similar poll in December and 2.3 percent in a November poll. The median of forecasts for 2010 GDP rose to growth of 2.9 percent from 2.8 percent in the December poll.
Economic data from late last year spurred big revisions to forecasts for growth in the fourth quarter of 2010, which climbed to 3.4 percent from 2.5 percent in the December poll.
Growth expectations for the first and second quarters of this year also jumped dramatically, to 3.2 percent from 2.7 percent and 2.8 percent respectively in last month's poll.
The upgrade in view has been due to better data, more fiscal stimulus in 2011 than we had expected -- particularly the payroll tax cut which was not anticipated -- and analysis that suggested households have now increased saving, said Andrew Tilton, economist at Goldman Sachs & Co. in New York.
Data showing rising retail sales in the final three months of last year, along with continued growth in the vast U.S. services sector as well as in manufacturing have helped to bolster the growth outlook.
But not all of the recent data has been rosy.
Unemployment remains comparatively high and is expected to stay that way, while payrolls data for December released earlier this month showed much less jobs growth than was expected.
Although recent data have underperformed expectations, the releases haven't significantly diminished projections for improved growth in 2011, said Kim Rupert, managing director of global fixed income analysis at Action Economics in San Francisco.
Indeed, some of the data may have been impacted by seasonal distortions, while for others, sights may have been set too high, such as with the U.S. December payroll report, Rupert said.
The forecasts for more robust growth also had economists increasing expectations for inflation. The median of forecasts called for the consumer price index to rise 1.7 percent this year, up from a forecast of 1.5 percent in the December poll.
Core CPI, which does not include food and energy costs, is expected to rise by 1.1 percent in 2011, up from 1.0 percent in the poll last month.
U.S. growth is expected to remain tepid enough that the unemployment rate will not dip significantly from December's 9.4 percent any time soon.
Unemployment this year is expected to ease to 9.0 percent in the fourth quarter of this year and then to 8.9 percent in the first quarter of 2012, according to the median of forecasts in the poll. U.S. unemployment for all of this year is expected to average 9.3 percent.
We think you need 2.5 percent to 2.75 percent growth just to tread water, just to keep the unemployment rate steady and provide enough jobs for a growing population, Tilton said, adding so 3.5 to 4 percent growth does bring the unemployment rate down, but it takes time.
Goldman Sachs is forecasting U.S. GDP growth of 3.4 percent in 2011 and 3.8 percent in 2012.
The forecasts for stronger growth were not likely to spur the U.S. Federal Reserve to raise interest rates from their current near zero level any time soon however.
The median of forecasts from the economists polled was for the first rate increase in the first quarter of 2012, whereas the forecast in the December poll was for the U.S. central bank to boost rates in the fourth quarter of this year.
A Reuters poll of primary dealers published earlier this month also saw no rate hike until 2012.
Most economists saw only a moderate risk to their GDP outlook from the weak fiscal condition of individual U.S. states.
(Polling by Bangalore Polling Unit; Editing by John Stonestreet)