The U.S. economy may end 2011 growing at its fastest clip in 18 months as analysts increase their forecasts for the fourth quarter just a few months after a slowdown raised concern among investors.
Economists at JPMorgan Chase & Co. (JPM) in New York now see gross domestic product rising 3 percent in the final quarter, up from a previous prediction of 2.5 percent. Macroeconomic Advisers in St. Louis increased its forecast to 3.2 percent from 2.9 percent at the start of November, while New York-based Morgan Stanley & Co. boosted its outlook to 3.5 percent from 3 percent.
“The incoming data on consumption, business spending and residential investment all point to GDP growth in the fourth quarter tracking 3.3 percent,” said John Herrmann, senior fixed-income strategist at State Street Global Markets in Boston.
Housing construction permits climbed last month to their highest level since March 2010, according to Commerce Department data, as the near record-low mortgage rates lured some buyers into the market.
The future pace of consumer spending ultimately will be decided by the growth of household income, which in turn is tied to the health of the job market.
And there, Herrmann saw some reason to be optimistic. He forecast that private-sector payrolls would rise an average 160,000 per month for the rest of this year and by 200,000 per month in the first four months of 2012. Private payrolls increased 104,000 in October.
In a sign that the job market may be improving, claims for unemployment benefits dropped to their lowest level in seven months in the week ended Nov. 12, to 388,000, Labor Department figures released yesterday showed.
Though actually most of this is driven by Multi-Family investment. As long as Europe doesn’t destroy the world – and it very well may – I expect Multi-Family starts to be posting record highs by the end of 2012.
And I mean record, never before in American history will construction be started on so many apartment complex units.
Also, I’ll do more on this but I think people expecting core inflation to be subdued until the economy recovers are quite wrong. I think core inflation will rise significantly in 2012, 2013 but the job market will still not be fully healed.
I also predict at this point, that while Bernanke was not able to get the Fed to act more aggressively in the downturn, he will be able to keep them from choking off the upturn.
We will have inflation level targeting by default, though that is always less effective than a formal statement.