–Estimates GDP At +1.6% In 2011, +2.0% In 2012
–Forecasts Unemployment Rate To Drop to 8.8% By Q4 2012 Vs 9.1% 2011
–Forecasts Car/Light Truck Sales At 12.6 Mln In 2011, 13.4 Mln 2012

By Brai Odion-Esene

WASHINGTON (MNI) – Participants at the Chicago Federal Reserve’s
annual Economic Outlook Symposium foresee only a slight pickup in the
pace of U.S. economic activity next year, a sentiment that does not
surprise given the headwinds that continue to batter the U.S. economy.

In results released Monday, the participants at the symposium held
in Chicago on December 2, however, provide an improved outlook for car
and light truck sales. They predicted sales of 12.6 million in 2011 —
vs. 11.6 million last year — that will rise to 13.4 million in 2012.

Overall, according to the median forecast of symposium
participants, “the nation’s economic growth in 2012 is expected to
increase at a pace below its historical average, inflation is predicted
to moderate next year, and the unemployment rate is forecasted to
decrease slightly in 2012,” the Chicago Fed said.

Real GDP, after growing by 3.1% last year, is expected to end 2011
up by a mere 1.6%, followed by a slight 2.0% increase at the end of next
year. After rising by 1.2% last year, inflation — in this case the
Consumer Price Index — is expected to average 3.8% this year and ease
to 2.4% in 2012.

Last week the U.S. Bureau of Labor Statistics said the unemployment
rate dropped to 8.6% in November from 9.0% the prior month. Participants
at the Chicago Fed symposium expect the rate, after averaging 9.6% in
the fourth quarter of 2010, to end this year at 9.1% and then dip
further “to a still quite high” 8.8% by the end of next year.

One of the factors likely contributing to the moderate pace of
economic growth expected next year is the small expansion in spending in
residential investment. According to the Chicago Fed, participants see
real residential investment up by 3.4% in 2012 from +1.6% this year.

The housing sector is forecast to continue to improve. The
consensus outlook shows housing starts are expected to edge higher to
0.60 million units this year and then rise slightly further to 0.66
million units in 2012.

Business spending is expected to increase at a solid pace of 4.7%
in 2012, after growing by 8.8% this year.

However, industrial production is forecast to slow next year, down
to 2.3% from an estimated 3.2% in 2011. Net exports are predicted to
remain flat this year and next, at -$409.4 billion and -$414.6 billion,

And as OPEC prepares to meet on December 14 and decide whether or
not to keep production at current levels, the consensus among those
surveyed by the Chicago Fed is for oil prices (WTI) to average $88.88
per barrel by the end of 2011 and then increase to $92 per barrel by the
end of 2012.

Interest rates are projected to rise this year and next year. The
short-term interest rate (one-year Treasury rate) is expected to edge up
10 basis points during 2012, and the long-term interest rate (ten-year
Treasury rate) is predicted to increase 51 basis points over the same
period. The trade-weighted U.S. dollar is expected to rise 0.6% in 2012.

** Market News International Washington Bureau: 202-371-2121 **