U.S. growth, inflation seen strengthening in 2011: Reuters poll
Stronger economic growth in the United States will eventually lead to rising inflation this year as increased consumer and business spending drive the recovery, according to a Reuters poll of economists released on Wednesday.
Even so, economists expect inflation in the world's biggest economy will remain relatively tame as high unemployment and the struggling housing market continue to be hurdles for recovery.
The U.S. inflation outlook stands in stark contrast to emerging markets, where most major central banks are grappling with sharp price rises and responding with higher interest rates -- as China did on Tuesday for the third time since October.
A Reuters poll of almost 70 economists suggests U.S. gross domestic product will rise by 3.2 percent on an annualized basis in 2011, edging up from the 3.0 percent that was forecast in January. The median of forecasts for 2010 GDP was unchanged at 2.9 percent.
Respondents are also feeling somewhat more upbeat about growth in the first quarter of the year with a forecast of 3.5 percent, up from the previous estimate of 3.2 percent. However, it is expected to dip back to 3.2 percent in the second quarter.
Analysts are hoping to see improved private sector growth take over from government stimulus in the economy.
I think the capital expenditure side is going to be very strong in the first quarter, said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co in San Francisco.
As employment improves, we will see retail (spending) be the second half of 2011 story.
PRICE PRESSURE
The median forecast calls for the consumer price index to rise to 1.9 percent this year, up from the 1.7 expected in January. In the first quarter, median inflation forecasts have also been moved up to 1.6 percent from the 1.4 percent that was previously expected.
Inflation is expected to hit 2.1 percent in the second quarter, up from previous estimates of 1.8 percent.
Investors have become nervous that recent upbeat economic data and surging food and oil prices could mean inflation is on the rise, which would throw a wrench into the Federal Reserve's accommodative policy. The central bank wants to keep rates near zero until the recovery is on a solid footing.
Nonetheless, most view underlying inflation in the United States as tame and not likely to shake the Fed's stance in the near term given the headwinds the economy still faces.
Core inflation, which strips out volatile food and energy costs, is expected to rise to 1.1 percent this year, unchanged from last month's poll.
Diane Swonk, economist at Mesirow Financial, said that plenty of spare capacity in the economy should help keep inflationary pressures in check.
Because of persisting high unemployment, we do not anticipate the Federal Reserve to begin a normalization of rates until the first quarter of 2012, said Swonk.
The median of over 90 analysts polled expect the central bank will keep rates on hold until the fourth quarter.
(Polling by Bangalore Polling Unit; Editing by Catherine Evans)
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