Nov. 10 (Bloomberg) -- The U.S. economy in 2004 may expand at the fastest pace in six years, fueled by a surge in business investment and sustained increases in consumer purchases, a private survey of economists found. Growth in the world's largest economy may reach 4.2 percent next year, the most since a 4.3 percent gain in 1998, according to the average estimate of 51 economists surveyed by Blue Chip Economic Indicators this month. The forecast is 0.3 percentage point higher than last month's survey.
Economists grew more optimistic after the government last month reported the economy expanded at the fastest pace in 19 years from July to September. Faster growth, improving profits, higher stock prices and more jobs are evidence of mounting business and consumer optimism that will help usher in a third year of expansion. Gains in confidence are ``a key to an ongoing growth recovery,'' said Maury Harris, chief economist at UBS Securities LLC in Stamford, Connecticut, and a participant in the survey, in an article written for the Blue Chip report. ``Insofar as households and firms base their behavior on their confidence, there can be simultaneous and self-reinforcing spending effects.'' Companies next year may increase spending 9.3 percent on new buildings, equipment and software, following an estimated 2.4 percent rise this year, the survey found. Such a jump would be the biggest since 1998.
Economists in the 27-year-old survey project that consumer spending, which accounts for 70 percent of the economy, will grow for a record 13th year. Households will buy an estimated 3.6 percent more goods and services in 2004, following an expected 3.1 percent increase this year, the report showed.
Jobs Outlook
First-half growth may run at a 3.9 percent annual pace, followed by a 4 percent annualized rate of gain in the third quarter and 3.6 percent in the final three months, according to the report. The Blue Chip survey was conducted Nov. 1 and 2. The responses weren't influenced by the October unemployment report released Friday, which showed the economy added 126,000 jobs last month, twice the projected gain and the third straight increase. The survey found that economists forecast unemployment will average 5.9 percent next year. The rate fell to 6 percent in October, the Labor Department said Friday. The economy may add an average of 146,000 jobs a month next year, according to the results of a special question.
Rebuilding Stockpiles
The larger-than-expected 7.2 percent jump in growth last quarter didn't damp estimates for the current three months, the report showed. The economy will probably grow at a 3.8 percent annual pace this quarter, 0.1 percentage point more than estimated in October, according to the survey. The improvement reflects a jump in production to replenish depleted inventories, the report showed. Rebuilding stockpiles will add 0.8 percentage point to growth in 2004, a separate special question found. The results of the Blue Chip survey are similar to the findings of a Bloomberg News survey of 55 economists polled between Oct. 24 and Nov. 3. That showed a median forecast of 4.1 percent growth in gross domestic product for 2004 and 4 percent for the final three months of 2003. The polls sample different groups of economists and overlap on some. For all of 2003, the economy may expand 2.9 percent, 0.2 percentage point more than projected last month, according to the Blue Chip average estimate.
Genetski.com, a Chicago-based advisory firm, was the most optimistic about growth in 2004, projecting 5.7 percent. Economists at Daiwa Institute of Research America were the most pessimistic at 2.8 percent.//www.bloomberg.com