Despite turbulence from hurricanes and high energy prices, the economy is expected to log respectable growth this year and next, business economists say.
The economy, as measured by gross domestic product, is projected to grow by 3.6 percent for all of 2005 and 3.3 percent in 2006, according to the National Association for Business Economics.
"The hurricane season failed to blow the economy off course," said Carl Tannenbaum, the association's vice president and chief economist at LaSalle Bank.
Against this backdrop of the economy's resiliency, the Federal Reserve is likely to continue boosting short-term interest rates well into next year to keep a lid on inflation, Tannenbaum said.
The new estimate for GDP growth in 2005 is slightly higher than a NABE projection released in September, while the fresh estimate for 2006 is slightly lower. GDP measures the value of all goods and services produced within the United States.
If NABE's new projections are correct, they'll mark a moderation in growth from 2004 but would still represent a decent performance, economists said. Last year, the economy grew by 4.2 percent, the best showing in five years.
Hurricane Katrina slammed into the Gulf Coast on Aug. 29. Rita barreled into the region on Sept. 24. Those storms battered crucial oil and gas facilities and catapulted oil prices above $70 a barrel and gasoline prices above $3 a gallon. Since then energy prices have moderated. Wilma hit on Oct. 24, causing widespread power outages and property damage across Florida.
To tamp down inflation fears, the Fed in early November raised a key interest rate by one-quarter percentage point to 4 percent, the 12th increase of that size since June 2004. Another quarter-point bump-up is expected on Dec. 13, the Fed's last scheduled meeting of this year. Economists expect more rate increases to follow in 2006.
The still-solid economic growth expected for this year and next should help the national employment climate, which was rocked by the hurricanes.
The nation's unemployment rate, which stood at 5.5 percent in 2004, should drop to 5.1 percent this year and then dip to 5 percent next year, according to the group's projections.