The U.S. economy bounced back in the first quarter but growth will slow through 2006 as the housing market cools and consumers become a little more cautious, a survey of top forecasters showed on Monday.
Panelists surveyed in the Blue Chip Economic Indicators newsletter did not alter forecasts made a month ago for solid 3.4 percent gross domestic product growth and moderate inflation this year.
"While GDP growth this year is expected to approximate that recorded in 2005, the consensus believes the mix of growth will look somewhat different, with personal consumption and residential investment contributing less to GDP this year than last," the newsletter said.
"The consensus also predicts that economic growth will be noticeably stronger in the first half of this year than in the second half," it said.
Expectations for more interest rates hikes by the Federal Reserve have ramped up slightly. Nearly 69 percent expect the Fed to raise rates one more time before July, while 21 percent said two more rate hikes were in store by then.
Just 12.5 percent think the central bank will cut the target federal funds rate by the end of 2006, down from nearly 15 percent who expected a rate cut two months ago.
Fed policy-makers have already raised rates 15 times since mid-2004 in a bid to head off inflation pressures.
The Blue Chip said stable to lower prices for energy seem crucial to expectations for slower inflation this year.
It forecast a 2.9 percent increase in the Consumer Price Index, down from a 3.4 percent gain in 2005. The core price index for personal consumption expenditures — the Fed's favored inflation measure which strips out volatile food and energy prices — was forecast to increase 2.1 percent this year and 2.2 percent in 2007, up from 2.0 percent in 2004 and 2005.
The survey of more than 50 professional forecasters was taken April 6 to April 7.
In a special question added to the monthly survey, Blue Chip asked forecasters to characterize conditions in the U.S. labor market. Only 4 percent said conditions were "tight," while 33 percent said the market was "moderately tight," and 60 percent said conditions were "somewhat tight."
The U.S. unemployment rate dropped back to a 4-1/2-year low of 4.7 percent in March, and some analysts are worried such tight conditions will make it hard for employers to retain workers, which could drive up wage growth and spark inflation.
In a separate question, more than 81 percent said U.S. manufacturing would be weaker in the second half of the year than in the first six months of 2006.