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Amid Gloomy Economic Reports, Bankers Predict An Improvement

Over the past month, there has been a steady stream of gloomy economic reports. After slowly declining for a year and a half, the nation's...
June 22, 2011

Over the past month, there has been a steady stream of gloomy economic reports. After slowly declining for a year and a half, the nation's unemployment rate has ticked up. And the head of the Congressional Budget Office (CBO) made headlines when he previewed an upcoming economic forecast by saying. "A great deal of the pain of this downturn lies in front of us still."

But amid all the new gloom, an economic advisory committee of the American Bankers Association (ABA) was out last week with a more optimistic prediction. It released two surveys predicting that the U.S. economy will weather the current soft patch and growth should pick up again, although a bit more moderately than previously expected.

Separate panels of bank sector economists and leading business executives predicted 2.4 percent growth in the real gross domestic product rate this year, down from 3.3 percent forecasted in January. The first quarter's 1.8 percent GDP rate and expectations for a slight increase to 2 percent in the second quarter are weighing on forecasted growth of 2.9 percent in the third quarter and 3 percent in the fourth quarter. The Business Roundtable also marked down growth expectations, though not as dramatically. The group's members predicted this year's real GDP would be 2.8 percent, down only slightly from 2.9 percent projected in the first quarter.

The ABA's optimism has yet to filter down to small business. The National Federation of Independent Business (NFIB) reports that for the third consecutive month in May, the NFIB's Small Business Optimism Index fell. While the drop was slight - three-tenths of a point - it shows that optimism is still moving in the wrong direction. "Corporate profits may be at a record high, but businesses on Main Street are still scraping by," said NFIB chief economist Bill Dunkelberg.

Read more on ABA's economic outlook: Bank Economists See Improving Economic Growth (ABA 6/14/11)

Read more the economic effects on small businesses: Small Business Optimism Dips a Little Lower (NFIB 6/14/11)