Washington, April 8 (Bloomberg) -- Economists sliced their forecasts for 2003 U.S. economic growth for the third straight month as manufacturing weakened and employers fired more workers, the latest Blue Chip Economic Indicators survey found. The economy will probably expand 2.4 percent this year, down from last month's forecast of a 2.6 percent increase in gross domestic product, according to the average of forecasts by 53 economists in the April Blue Chip survey. That would match growth in 2002. Personal consumption spending is expected to rise 2.3 percent, the slowest growth in a dozen years and less than forecast last month.
Companies are waiting until the war with Iraq ends to rebuild inventories and boost hiring, the report said, and ``nonexistent'' job growth is holding back consumer spending. The U.S. economy lost 108,000 jobs in March, the fourth month in five of declining payrolls. ``The private U.S. economy likely stalled over the past month, and except for strength in defense outlays, first-half growth likely would be zero,'' the report said, quoting Richard Berner and David Greenlaw, economists at Morgan Stanley & Co. in New York, who participated in the survey. The survey was taken last Wednesday and Thursday as fighting in Iraq entered the third week, when crude oil prices on the New York Mercantile Exchange had fallen 23 percent from the March 12 high of $37.83 a barrel. ``Certainly the significant unwinding of the war premium in oil prices would have helped the outlook,'' said Randell More, editor of the Blue Chip report.
The Institute for Supply Management's index of factory activity fell in March to the lowest since November 2001, and its index of service industries contracted for the first time since January 2002.
Second-Half Outlook
The economy is expected to pick up in the second half ``as worries about the US/Iraq war wane and energy prices continue to retreat,'' the report said. ``Lower energy prices and greater confidence are expected to boost both inflation-adjusted consumer spending and income growth, eventually leading to a pick up in factory orders, increased production, and stepped-up hiring.'' In response to a special question, about 69 percent of the forecasters said that they don't expect Federal Reserve policy makers to further lower interest rates this year. GDP probably expanded at a 1.8 percent annual pace in the first three months of the year, economists said. They see the pace of growth accelerating to 3.8 percent by the final quarter of 2003.
The end of the war with Iraq and a smooth transition to a new government will buttress confidence and push energy prices down, allowing growth to speed up, the report said. The most optimistic forecast in the survey, from Bear Stearns & Co., projects 3 percent growth this year. The most pessimistic, by Georgia State University, calls for growth of 1.4 percent. In the April sounding, 36 economists reduced their predictions, six raised their estimates and 11 made no change.
Corporate Investment
Corporate investment will probably increase 2.9 percent this year, compared with last month's forecast of a 3.4 percent gain, and production is expected to rise 1.8 percent, less than the 2.1 percent forecast in the March report. ``Encouraged by an expected acceleration in demand, businesses are expected to gradually begin to rebuild historically lean inventories in the second half of the year, adding to the pace of GDP growth in the process,'' the report said. Expectations for consumer spending dimmed as the war and a faltering job market dragged down confidence, the report said. The projection of a 2.3 percent increase is down from the 2.5 percent forecast last month. Economists also lowered their expectations for 2003 personal income growth to 2.7 percent from 3.1 percent last month, compared with last year's 4.2 percent increase. Nearly all the economists surveyed expect Congress to approve a fiscal stimulus plan this year, with half forecasting a package totaling between $51 billion and $100 billion this year, a special question found. ///www.bloomberg.com