BEIJING, Dec. 28 (Xinhuanet)-- More parts of the US economy may contribute to its growth next year, meaning the expansion will last longer whether or not it slows down, say economists including Christopher Low of FTN Financial in New York.

    Low, like most economists surveyed by Bloomberg News, predicts the economy will grow more slowly in 2005. In his scenario, growth will decline to 4 per cent from 4.4 per cent this year as hot spots such as housing start to cool.

    Even with such a slowdown, he envisions 2.4 million new jobs, or 200,000 more than this year; a jump of almost 12 per cent in exports, up from 8 per cent; and a 0.5 per cent rise in real wages after a drop this year. Capital spending will rise 14 per cent after a 10 per cent jump in 2004, he says.

    "We're heading into a new phase of the recovery in which the expansion will be more self-sustaining, based on more job creation and income growth," Low said. "We're likely to have a smoother growth path that will spark heightened investor confidence and ultimately improve earnings."

    Low's 4 per cent growth prediction for 2005 is above that of the Bush administration, which expects 3.5 per cent growth, and the median forecast of the 62 economists in the Bloomberg survey, 3.6 per cent. The Commerce Department is expected to report in three months that gross domestic product, or the sum of all goods and services, expanded 4.4 per cent in 2004, based on the Bloomberg survey.

    Other economists share the view that slower growth could be better growth in 2005. An economy that kept growing as fast next year as this would heighten inflation risks and be more vulnerable if the faster-growing components hit a snag, said Richard DeKaser, chief economist at National City Corp in Cleveland.

    A slower and broader expansion "will be a more certain-footed one that's less reliant on government stimulus" such as tax cuts and low interest rates, DeKaser said. Now "we have something that is much more sustainable going for us job gains and wealth gains."

    While the US economy usually shows across-the-board improvement in the second year of a recovery, the initial rebound from the 2001 recession was fueled mainly by housing and consumer spending, said James F. Smith, director of the Kenan Institute's Centre for Business Forecasting at the University of North Carolina in Chapel Hill. "In a nutshell, 2005 will be the kind of year that most people hoped 2002 would have been," he said.

    Growth of 3 per cent to 4 per cent next year will be "just right," said James Tisch, chief executive of New York-based Loews Corp, whose subsidiaries provide insurance, make cigarettes and drill for oil. "Any more than that and you significantly increase inflationary pressures, and any less than that and you are not performing at what your potential is."

    Economists disagree about how much the economy will slow, with Low and James Glassman of JP Morgan Securities Inc in New York among those looking for growth of at least 4 per cent, and David Rosenberg's team at Merrill Lynch & Co predicting a full percentage point lower, at 3 per cent. Almost a fifth of the forecasters in the Bloomberg survey predict growth of 4 per cent or more.

    "New energy is coming back into the economy - you can sense it," Glassman said. By January, "the world is going to look different" to economists and market strategists, he said. "You'll see everyone scrambling to jack up their numbers."

    Low, Glassman and Richard Berner at Morgan Stanley & Co in New York are among economists who predict that shifts in the economy will lead to a longer-lasting expansion.

    Their assumptions include that consumer spending will stay strong as the job market improves and real wages begin to increase; oil prices will fall, giving businesses and consumers more to spend on other things; capital spending will rise more rapidly; and productivity growth will slow, prompting businesses to hire.

    The unemployment rate is forecast to fall to 5.2 per cent by the end of next year from 5.4 per cent now, based on the median forecast in the Bloomberg survey. The administration predicts the economy will add about 175,000 jobs a month next year, up about 5,000 from the 12-month average through November.

    "Many believe that because the current expansion has been sub-par through its first three years it is weak and vulnerable to shocks," Berner said. "In our view, this sub-par performance implies that the expansion will last longer."

    Berner predicts the economy will grow 3.7 per cent in 2005 and 4.3 per cent for 2006, spurred by faster global growth and declining energy prices.

    
   (China Daily)