WASHINGTON, May 10: Private economists trimmed their forecasts for US economic growth still further and now regard even the second half of 2003 with pessimism after a slew of data showed the US economy still struggling to recover.

The closely watched Blue Chip Economic Indicators newsletter said its panel cut growth forecasts for each of the next three quarters, extending the steady erosion in the survey’s outlook that began last summer.

Gloomier still, nearly two-thirds of the more than 50 business economists on the panel said risks to their forecasts for growth in the second half of the year were on the downside.

In large part, our panel members grew a bit more pessimistic over the past month because most of the latest economic releases and private sector survey results signaled that recent economic activity remained quite subdued, said the May edition of the newsletter.

Blue Chip said its panel forecast a second-quarter growth rate of 2.1 per cent, down 0.1 percentage point from the 2.2 per cent projection offered in April.

Forecasts for the third and fourth quarters of the year were also trimmed by 0.1 percentage point, to 3.5 per cent and 3.7 per cent, respectively.

The paring of consensus estimates of GDP growth over the remainder of this year reflects diminished expectations of growth in personal consumption expenditures, business inventories, capital spending and industrial production, Blue Chip said in a summary of its latest survey.

Its May forecast pegged 2003 gross domestic product growth at 2.3pc, down from 2.4pc projected in April and the 2.4pc growth achieved last year. This was the fourth month in a row the panel has cut the annual forecast.

Disappointing employment and manufacturing data in April show the economy likely began the second quarter on a sluggish note, following a weaker-than-expected initial estimate of first-quarter GDP growth of just 1.6 per cent, Blue Chip said.

While most analysts still expect the quick, decisive military victory by the United States in Iraq will produce a rebound in the pace of consumer spending and business investment, the panel was scaling back just how soon and by how much the pace of overall growth is likely to accelerate.

Business inventories are not expected to grow as fast as originally thought due to lingering cautiousness on the part of businesses about the likely strength of aggregate demand going forward, it said.

The US economy lost 48,000 jobs in April, notching the third consecutive monthly decline after a 124,000 reduction in March and 353,000 loss in February.

Indeed, payrolls have dropped in six of the last eight months, Blue Chip said, adding the plunge in weekly hours worked to a cyclical low of 34.0 a week was particularly discouraging.

While the return of mortgage rates to their recent lows likely signals housing demand will remain reasonably strong for a while longer, cool weather and a very modest improvement in vehicle sales will likely leave April retail sales little changed from March, the private survey said.—Reuters