CHICAGO (Reuters):
U.S. ECONOMIC growth could soften in 2006 but inflation should decline and the jobless rate drift lower as well, according to participants at a Federal Reserve Bank of Chicago conference released on Monday.
Real gross domestic product growth was forecast at 3.2 per cent, down from a projected 3.6 per cent this year, as the rate of consumer spending levels off.
32 PARTICIPANTS
The forecasts came from 32 participants in banking, manufacturing, consulting and services firms, as well as academics, who attended the Chicago Fed's Economic Outlook Symposium on Friday.
All major components of GDP are expected to contribute to a slight softening in growth next year, notably a flattening in residential investment as interest rates rise.
INVESTMENT PEGGED TO SLIP
Residential investment was pegged to slip 0.8 per cent after jumping 7.0 per cent this year. Housing starts were forecast to fall about 7 per cent in the new year.
Conference participants looked for the jobless rate to tick lower in 2006, to 5.0 per cent from 5.1 per cent.
Inflation, measured by the consumer price index, was forecast at 3.0 per cent against 3.9 per cent in 2005, on a fourth quarter over fourth quarter basis.
The average price of crude oil for 2006 was forecast at $55.69 per barrel, down from $61.21 per barrel, helping to pull headline inflation lower.
NEXT YEAR'S VEHICLE SALES
Light vehicle sales next year were expected to total 16.8 million units, just below this year's level.
The 10-year Treasury note yield was forecast at 5.11 per cent in the new year, up from 4.60 per cent in 2005 and 4.17 per cent in 2004.
Short-term yields are expected to rise by roughly the same amount, keeping the yield curve relatively constant, the Chicago Fed said.
