US economy could grow more than expected in 2011: WSJ Survey

Economists are more positive about economic growth in 2011 in the United States, according to a survey by the Wall Street Journal.

The 55 respondents raised their growth projects for gross domestic product for nearly every period, including the current quarter, the paper said.

On average, the economists now predict GDP growth of 2.6 percent in the current quarter, up from the 2.4 percent growth projected last month, the paper added.

The U.S. economy has been seeing some signs of growth. It grew 2.5 percent in the third quarter and 1.7 percent in the previous quarter. However, recent indicators like housing, job data and mortgage rates have been inconsistent, creating doubts whether the economic growth is losing steam.

The economists now see stronger expansion in the first half of 2011, with growth picking up speed as the year progresses, WSJ said in the report, adding that GDP is expected to grow about 3 percent in 2011.

Meanwhile, they have reduced the odds of a double-dip recession to 15 percent, the lowest average forecast of the year, from 22 percent in September survey, the paper added.

Most of the respondents state that there are better chances of the economy outperforming the forecasts in 2011 than underperforming, according to the report.

The possible extension of tax cuts from the Bush era will also help the economy, the survey stated.

However, since the survey was conducted from Dec. 3-8, not all forecasts take the tentative tax deal into account, WSJ said.

In the meanwhile, the effect of the second round of quantitative easing remains a little uncertain. The U.S. Federal Reserve announced the QE2, as it is popularly known, in the first week of November, to boost inflation and economic growth.

While the bond-buying program would add fuel to the recovery, the economists said the effect may not be large, the paper said.

Boston Fed's Chairman, Eric Rosengren, expects the economy to add about 700,000 jobs or reduce the unemployment rate by half a percentage point by 2012.

According to WSJ's survey, 42 of the 52 respondents believe this estimate to be too optimistic.

This is one of the risk factors associated with economic growth next year.

Though more than 4-in-5 economists don't see the unemployment rate increasing from here, the pace of job growth still is expected only to bring the jobless rate down slowly, the paper said.

Housing starts also continue to be under stress, though they show some signs of stabilization. The economists expect continued moribund housing starts in the new year, while home prices are flat, WSJ said.

At the same time, concerns remain about turmoil in Europe's economy, with the economists on average putting about 1-in-3 odds of a country exiting the euro zone in the next three years, the paper added.