Good News: Consumer, Business Spending Expected To Spur U.S. Economy

A newly resilient economy is poised to expand this year at its fastest pace since 2003, thanks in part to brisk spending by consumers and businesses, a new survey has found.

In the findings from The Wall Street Journal, many economists ratcheted up their growth forecasts because of recent reports suggesting a greater willingness to spend. “We’re in a lot different place from last year,” says Goldman Sachs’s Jan Hatzius, who last year was one of the most bearish economists on Wall Street, but now is among the most optimistic on growth.

The economists polled expect gross domestic product will be 3.5 percent higher in the fourth quarter of 2011 than a year earlier, up from the 3.3 percent increase they projected in last month’s survey, which would be the largest increase since 2003. They look for GDP to expand at a 3.6 percent annual rate in the current quarter, accelerating from the 3.2 percent rate recorded in the final months of 2010.

Businesses appear more confident about spending on new equipment and, more important, new hiring. Although the January employment report showed little job growth, economists have largely discounted that weakness as the result of winter weather. Plus, the recent pace of retail sales suggests that consumers’ attitudes are sunnier when they are at the mall than when talking to pollsters, says Chris Varvares, an economist at Macroeconomic Advisers. He says that although unemployment is high, people with jobs are no longer as worried that they will be next in line to be laid off. That makes them more willing to make purchases they postponed during the downturn.

The complete story, along with more projections for the year ahead, can be accessed HERE.