Wednesday, 23 February 2005

NABE forecasts growth, consumer confidence dips but oil surges

A panel of economists surveyed by the National Association for Business Economics (NABE) in the US forecasts 3.6 percent real GDP growth in 2005, and projects continued growth for 2006 at the same 3.6 percent pace. The panel forecasts consumer spending to continue expanding at a 3.7 percent rate this year.

That forecast seems broadly consistent with the latest reading of The Conference Board's Consumer Confidence Index. The Index dipped to 104.0 in February from 105.1 in January. The Present Situation Index increased to 116.4 from 112.1. The Expectations Index, however, declined to 95.7 from 100.4 last month. Lynn Franco, director of The Conference Board’s Consumer Research Center, thinks that "both present and future indicators point toward continued expansion in the months ahead".

Rising oil prices, though, may derail the expansion. Yesterday, oil prices jumped to their highest level in more than three months, with NYMEX crude rising above US$51 a barrel.

Recently, Morgan Stanley revised its 2005 forecast for oil prices, raising Brent crude price up by 14 percent from US$36.80 a barrel to US$42.10. Maybe it will have to raise its forecast again.

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