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US economists predict recession to end but expect weak recovery

The US recession will end within months but growth will be weak, according to the majority of economists surveyed in an influential US poll.

The poll was published hours before rating agency Moody's said it saw no need to lower the country's triple-A sovereign rating.

The agency cited the "diverse and resilient" economy, strong government institutions, high per capita income, and central position in the global economy, as well as the dollar's role as the world's reserve currency, as reasons to maintain the top rating.

The world's largest economy will begin to expand next quarter, according to 74pc of economists polled by the National Association for Business Economics (NABE).

The bad news is that the economists expect growth to slow and unemployment to rise in the second half of this year and next year.

US President Barack Obama's stimulus spending package and Federal Reserve efforts to thaw credit markets are helping pull America's economy out of the worst slump in half a century, the survey said.

While housing is stabilising, the economists predicted consumer spending would be restrained by job losses which would continue for the rest of the year.

"There are emerging signs that the economy is stabilising," said economist Chris Varvares. Still, the recovery may be "considerably more moderate than those typically experienced following steep declines", he added

Revival

The expected revival in US fortunes may be slow to benefit Ireland.

The NABE economists polled see business investment continuing to fall as companies cut spending on equipment, software and facilities, in order to reduce inventories.

The cost of living in the US would slide further and worker productivity would improve this year, the report also showed.

That would make US workers even more competitive than their Irish counterparts working for US multi-nationals.

Irish workers in multi- nationals are already becoming more expensive than US workers as the euro rises against the dollar.

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The economy will shrink at a 1.8pc annual rate between April and June, and then grow at a 0.7pc pace in the next three months, the survey showed. Growth will accelerate to a 1.8pc rate by the final quarter.

Spending

Consumer spending, which accounts for about 70pc of the US economy, may fall 0.4pc this year, compared with a 1.3pc drop forecast in a prior poll taken in February.

Hopes of a US recovery coincide with other evidence that the first global recession since World War II is easing.

Japan posted an unexpected trade surplus yesterday and Bank of Japan Governor Masaaki Shirakawa said last week that the economy would resume growing this quarter.

In Germany, investor confidence rose this month to the highest since 2006.

Deutsche Bank boss Josef Ackermann said this week that policy measures by central banks and governments "have assisted in reviving trust in the financial markets and the real economy".


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