Washington, March 30 (Bloomberg) -- The U.S. economy is likely to grow this year atthe weakest pace in a decade as a second half pick-up is slow to develop, aBloomberg News survey of economists showed. A lower inflation rate and a limitedrise in unemployment may contribute to a rebound early in 2002. The economy will probably expand 1.8 percent this year, the smallest increase sincethe economy contracted by 0.5 percent in 1991, when the last recession ended,analysts said. That's down from 3 percent growth projected in the previous survey inDecember, when most had expected a second-half growth spurt. The economy willbe expanding at 3.5 percent by the first quarter of 2002, the survey showed. Sluggish business investment and consumer spending, weaker exports, and a drop instock prices are the reasons analysts see the economy growing more slowly thisyear than once anticipated. The first three months of 2001, when factories reducedproduction to pare excess stockpiles of cars and other goods, will probably be theweakest of the year, the survey shows. ``We are going to skirt recession, but it's going to be a disappointing year,'' saidMichael Moran, chief economist at Daiwa Securities Inc. in New York, who forecasts0.7 percent growth in the just-ending first quarter and 2.1 percent for the year. Analysts are counting on Federal Reserve Chairman Alan Greenspan and fellowpolicy makers to give a boost to the economy by lowering their benchmark interestrate from 5 percent today to 4.25 percent by the end of the year. Central bankers have already reduced the overnight bank lending rate in three half-percentage-point steps this year to preserve the record economic expansion thatbegan its 11th year this month. Tax cuts being pushed by President George W. Bushshould also help, analysts said. The survey was conducted from March 19 through March 28.
No Recession
Seven of 44 economists surveyed by Bloomberg are forecasting two or moreconsecutive quarters of contraction this year, the conventional definition of arecession. The seven include Richard Berner, chief U.S. economist at MorganStanley Dean Witter in New York, and Robert MacIntosh, chief economist at EatonVance Management Inc. in Boston. Berner, among the first to forecast a recession for this year, sees growth of 0.7percent for all of 2001. MacIntosh has the most pessimistic forecast of a 1 percentcontraction for the year. The most optimistic forecast in the survey, from Gail Fosler, chief economist at theConference Board, is that the economy will grow 3.4 percent this year.
Lowered Expectations
Economists have scaled back expectations for a quick recovery. With CiscoSystems Inc., the No. 1 maker of computer- networking equipment, and othercompanies warning that a rebound hasn't yet materialized, analysts now project theeconomy will grow at a 1.2 percent rate in the second quarter, down from a priorforecast of 2.6 percent. Then, as stock prices stabilize, lower interest rates take hold and both consumersand businesses regain confidence, the economy will start to gather speed, analystssaid. The full effects of the recovery probably won't be apparent until the first quarterof 2002, when analysts project the economy will grow at a 3.5 percent annual rate, inline with its potential. ``These things take time to work out,'' said Bill Quan, senior economist at Aubrey G.Lanston & Co. in New York. ``That's the whole definition of a `soft landing.' '' Thesurvey projected the economy will grow at a 2.5 percent rate in the third quarter of2001 and then accelerate to a 3 percent pace in the last three months of 2000. One side effect of the sluggish growth will be a rise in the unemployment rate.Economists in the Bloomberg survey projected an increase in the jobless rate to 4.6percent by the end of the year, from 4.2 percent in February. At the same time, inflation as measured by the consumer price index is likely to rise2.8 percent in 2001, according to the forecasters. That would be down from lastyear's 3.4 percent increase.