Business Analysis Group Says 2004 Will Be An Economic Winner

Revising its previously-released year-end economic forecast sharply upward, The Conference Board has projected that real GDP growth will hit 5.7% next year, making 2004 the best year economically in the last 20 years.

The forecast, by Conference Board Chief Economist Gail Fosler, expects worker productivity, which set a 20 year record in the third quarter, to rise at a healthy 3.6% next year. That would follow a gain of 4.3% this year.

The economic forecast is prepared for more than 2,500 corporate members of The Conference Board’s global business network, based in 66 na-tions.

"Growing business spending and continued strength in consumer spend-ing are generating growth throughout the U.S. economy," says Fosler. "This burgeoning strength is reflected in The Conference Board’s widely watched Leading Economic Indicators, the Consumer Confidence Index and the Help Wanted Advertising Index. While the labor market, a critical factor in sustaining growth, is growing slowly, a pickup in hiring may already have begun." .

Real consumer spending, which con-tinues to fuel growth, will increase at a 4.7% pace next year, up from about 3.2% this year. Another gain of 4.3% is projected for 2005.

While the U.S. economy is expected to generate more than one million new jobs next year, the unemployment rate will edge down only slightly, averaging 5.6% in 2004.

The Conference Board forecast notes that as the U.S. economy bounces back, so is Europe, although growth will be subdued compared to most other major parts of the world. "For all the concern about a weak dollar," says Fosler, "the dollar will be worth more than the euro by the end of the year."

Real capital spending, which will rise by only 2.7% this year, will climb 11.7% next year and another 8.6% in 2005. Pretax corporate operating profits will top $1 trillion next year, up from a projected $928 billion this year. Another trillion-dollar-plus gain in profits is expected in 2005.

The continued recovery in business profits, which was a key ingredient in funding new investment (crucial in making 2004 a strong growth year), depends on price relief Business profits will benefit from both improved volume and recovering profit margins in 2004, as inflation creeps back to-ward 3% by the end of the year.

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