U.S. growth outlook downgraded ahead of QE2: Reuters poll

A man pushes his shopping cart down an aisle at a Home Depot store in New York, July 29, 2010.

NEW YORK (Reuters) - The U.S. growth outlook has darkened significantly in the latest Reuters poll, even though the Federal Reserve is unanimously expected to embark on a fresh round of asset purchases to prop up the economy.

Economists have chopped their outlook for gross domestic product (GDP) through to the third quarter of 2011, with no prospect of an interest rate hike until the end of next year.

All 52 analysts who answered the question expected a second round of quantitative easing (QE2), which would likely include expanded Fed purchases of government bonds. And the vast majority expect an announcement at the central bank's policy meeting in November.

"QE2 in November is all but certain and the only debate stands over the details of implementation. Count us as skeptical if not on the likelihood of QE2 then certainly on its effectiveness," said Jeffrey Rosenberg, head of global credit strategy at BofAML in New York.

The median of forecasts provided put the size of the next round of asset purchases at $500 billion. Estimates ranged from $500 billion to $1.25 trillion, roughly similar to a Reuters poll last week just of the Wall Street bond dealers.

But doubts remain over how effective this next round of asset purchases would be.

"It is not the supply or cost of credit that is currently the deterrent to economic activity. Rather, confidence remains low, suppressing investment and demand for credit," Rosenberg said.

The median forecast in the survey of more than 70 economists, taken over the past week, put U.S. GDP at 2.0 percent annualized in the fourth quarter, down from 2.1 percent expected last month and 2.7 percent expected in the July poll.

Growth is expected to pick up to 2.2 percent in the first quarter of 2011, but that is 0.3 percentage points slower than the median from last month's poll.

The consensus for the second and third quarters of 2011 of 2.5 percent and 2.8 percent were each chopped by 0.2 percentage points in the past month.

Economists expect growth will be hobbled by thrift as consumers grapple debts, job woes and a moribund housing market.

"Our current expectation is for slow growth, relatively high unemployment, stabilizing home prices, and some growth in inflation prospects," said Marc Pado at Cantor Fitzgerald.

The poll found higher consensus forecasts for the U.S. jobless rate, currently at 9.6 percent. It is expected to remain there in the first quarter of next year.

The core consumer price index, which does not include food or energy prices, will average 1.0 percent in 2010 and 1.2 percent in 2011, unchanged from the September poll.

(Polling by the Bangalore Polling Unit; Editing by Ross Finley and Catherine Evans)