Economic growth to return by the end of the summer

But only tepid growth. Unemployment will probably hit double digits.. Only next year will trend growth return and can unemployment and public finances move towards more sustainable levels..

Economists see end to US downturn

The US economy should emerge from recession by the late summer, according to economists from some of the country’s top banks.

The American Bankers Association’s Economic Advisory Committee has said it expects economic activity to increase by 0.5% between July and September.

But committee head Bruce Kasman said, “the economy will return to growth [in the quarter] but not to health.”

The bankers also said US unemployment would hit 10% early next year.

Separately, the secretary-general of the Organisation for Economic Co-operation and Development (OECD) has said that economic recovery within the group’s 30 countries will begin at the end of this year.

Speaking in Mexico, Angel Gurria added that the US would be one of the first countries to come out of recession.

Housing recovery

US consumer spending, which accounts for about two-thirds of economic growth in the US, should increase in the second half of the year and help to moderate lay-offs and cuts in investment spending, the Economic Advisory Committee said.

“Coupled with support from policy stimulus and an improvement in financial market conditions, these developments have made it likely that the overall economy will expand in the second half of the year,” it predicted.

Mr Kasman, chief economist for JP Morgan Chase, also said that a recovery in the housing market would be an “important contributor” to economic growth.

But he cautioned against too much optimism.

“Growth in the coming quarters is likely to gather momentum but will not prove sufficiently robust to undo much of the severe damage done to our labour markets and public finances,” he said.

This means that growth would not return to “trend pace” until the middle of 2010, he added.

For this reason, unemployment would remain at or above 9.5% for the whole of next year.

The current unemployment rate in the US is 9.4%, the highest since 1983.

Mixed messages

The US economy contracted by an annual rate of 5.7% in the first three months of 2009.

It has shrunk for three consecutive quarters – the first time that has happened since 1975.

And recent figures have sent out mixed messages about the timing of any recovery.

Earlier on Tuesday, figures showed that the number of new houses being built in the US in May bounced from record lows in April.

But separate figures showed that industrial production fell by more than analysts had expected.