Tuesday, September 13, 2011

Tamping Down Expectations

A new survey of business economists adds another strong voice to what many have suspected: The American economy is headed for another slowdown over the next year. The economists polled by the National Association for Business Economics forecast our GDP to grow by 1.7 percent over the remainder of 2011, and 2.3 percent in 2012. That's down from a forecast in May of 2.8 percent and 3.2 percent, respectively.

The survey also knocked down previous estimates of consumer spending growth, from 2.8 percent in the May forecast to 2.1 percent in the current one. The prediction for monthly jobs added for the remainder of the year fell from 190,300 in May to 124,000 for the September survey.

If there's a bright spot to all of this, it's that inflation expectations have been tamped way down as well. The ten-year TIPS spread has dropped to right around 2 percent, reflecting a global trend. Around the world, bond yields indicate an expectation of just 1.3 percent for consumer inflation.

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