High Commodity Prices to Lower 2011 Growth: Survey

High commodity prices will slow U.S. economic growth and raise inflation this year, but the Federal Reserve is not expected to start increasing interest rates before the first quarter of 2012, a survey showed on Monday.


The National Association for Business Economics' latest survey showed economists trimmed their 2011 annual average growth estimate to 2.8 percent from 3.3 percent in February.

Economists lowered their growth estimates in response to the first-quarter's 1.8 percent annual pace, which was a sharp slowdown from the 3.1 percent rate in the final three months of 2010.

Growth was held back by high food and gasoline prices. "Panelists are increasingly concerned about rising commodity prices and inflation," said NABE president Richard Wobbekind. The survey was conducted between April 13 and May 1, and covered 41 economists.

About a third of the respondents saw the recovery continuing at a moderate pace, while 29 percent saw the economy overcoming the headwinds of high commodity prices and a weak housing market.

Economists also raised their inflation forecasts for this year, but did not expect prices to remain elevated through 2012.

The survey forecast the consumer price index averaging 2.8 percent this year, moderating to 2.1 percent in 2012. That compared to 1.8 percent and 1.9 percent respectively in February.

Their views on inflation are in line with the Federal Reserve's thesis that high commodity prices will not have a lasting effect on inflation.

With the boost to inflation from food and gasoline prices expected to be transitory, the U.S. central bank was seen keeping overnight lending rates near zero, with the first interest rate increase predicted in the first three months of next year.

Job growth, which has recently showed signs of gaining traction, was seen continuing at a moderate pace. Nonfarm payrolls were seen averaging 190,300 per month this year, rising to 202,500 in 2012.

That compares to 178,300 and 215,500 respectively in February. The unemployment rate was seen averaging 8.7 percent and dropping to 8.2 percent next year.

Back in February, the jobless rate was expected to average 9.1 percent this year and 8.4 percent in 2012.

Employers added 244,000 jobs in April, the most in 11 months. The unemployment rate rose to 9 percent from 8.8 percent in March.