U.S. economy to grow 3.1%: Conference Board

The U.S. economy should nearly match Canada in economic growth this year, thanks mainly to improved business spending, according to a study released Monday by the Conference Board of Canada.

The Ottawa-based business think-tank says U.S. gross domestic product is forecast to expand by 3.1 per cent, almost matching the 3.2 per cent growth the group predicts for the Canadian economy.

"Much of the growth has been attributable to a sharp improvement in inventory liquidation," said Kip Beckman, the Conference Board's principal research associate in forecasting and analysis.

"With demand slowly starting to improve, firms are having to restock their inventories ... a sure sign that the economy is starting to turn around."

During economic recoveries, companies often build up supplies in their warehouses in advance of new consumer demand. The Conference Board said this process in the United States will drive company production and economic growth.

Consumer no-show

But Beckman said individual Americans still face a large amount of accumulated personal debt because of the mortgage market collapse in 2009. As a result, consumer demand should lag as people work off the financial obligations from previous borrowings.

"To date, consumer spending has been a drag on overall economic growth ... [but] at least it is in positive territory," he said in his spring outlook for the U.S. economy.

Beckman expects consumer demand in the United States to grow by 1.8 per cent, well below the economy's overall growth rate.

The Conference Board's latest U.S. economic outlook represents an upgrade from the organization's prediction for American GDP in the winter of 2009. Back then, the Conference Board predicted the U.S. economy would grow by 2.8 per cent.

The upgrade reflects the stronger recovery present in many countries, including Canada, than economists originally expected.

But the Conference Board still believes the U.S. jobs market will improve much more slowly than the overall economy.

"The current outlook calls for the unemployment rate to rise above 10 per cent over the near term," Beckman said.