WASHINGTON The U.S. economy is poised to accelerate towards the end of the year and maintain its momentum through 2014, making a significant dent in unemployment, according to a Reuters survey.
The anticipated shift higher in growth is already being telegraphed by fairly robust forward-looking data on manufacturing and automobile sales.
But the economy has to get over a fiscal policy hurdle first, with talks looming in Washington to raise the nation's legal borrowing limit.
"As we move beyond all the uncertainties that continue to constrain business hiring and investment decisions, we are likely to start transitioning to a much more robust pace of growth at the end of the year, which would continue into next year," said Millan Mulraine, senior economist at TD Securities in New York.
The survey of around 70 economists forecast GDP growth stepping up to a 2.5 percent annualised rate in the final quarter this year and reaching 3 percent by the fourth quarter next year.
Growth this quarter is seen at a 2.0 percent rate, which would mark a slowdown from the 2.5 percent logged in the April-June period. Economists blame the expected moderation in growth on concerns over the prospect of another messy political fight over raising the nation's debt ceiling.
An acrimonious fight over raising the borrowing limit in 2011 led Standard & Poor's to strip the nation of its AAA rating. It also caused growth to brake sharply in the third quarter of that year as business and consumer confidence crumbled.
"The major risk is from Washington. We need a new budget by the end of the year, then we have to raise the debt ceiling, probably by mid-October. We could get a crisis," said Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Florida.
A major monetary policy shift is expected to take place before then. The Fed is expected to start scaling back the size of its bond purchases next week, according to the latest Reuters poll - a result that has been consistent in all 10 polls taken since Chairman Ben Bernanke hinted at it in May.
The latest poll taken after last week's jobs report showed it will trim the monthly purchases of $85 billion by $10 billion, slightly less than previously expected.
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With growth expected to gain steam, the pace of job gains should also accelerate and push the jobless rate lower.
The survey forecast non-farm payroll growth averaging 180,000 jobs per month in the fourth quarter, rising to a monthly average of 213,000 in the last three months of 2014. That would be an increase from the 165,000 jobs per month forecast for the third quarter of this year.
The unemployment rate was projected to average 7.2 percent in the fourth quarter, sliding to an average of 6.7 percent by the final quarter of next year.
It is seen averaging 7.0 percent in the second quarter of next year - the level the Federal Reserve has associated with a cessation of its bond-buying stimulus.
For the current quarter, the jobless rate is forecast at an average of 7.4 percent. That would be up slightly from the 4-1/2 year low of 7.3 percent reached in August. It has dropped from a peak of 10 percent in October 2009, but much of the decline has been because people have given up the hunt for work.
Despite the anticipated acceleration in growth, price pressures are expected to remain contained, with the Consumer Price Index not reaching 2 percent until next year.
The Federal Reserve targets 2 percent inflation, although it tracks a gauge that tends to run a bit below the CPI.
"The significant amount of slack that remains in the economy will continue to keep a lid on inflation pressures at least in the next year or so before we start gradually moving back to (the Fed's) target," said TD Securities' Mulraine.
The survey forecast the CPI averaging 1.6 percent in the fourth quarter and rising to an average of 2 percent in the second quarter of next year. It is expected to hover around that level for the rest of 2014.
The core CPI, which strips out food and energy costs, is seen averaging 1.8 percent in the fourth quarter and hitting 2 percent target by the second half of next year.
(Polling by Ashrith Doddi and Sarbani Haldar; Editing by Toby Chopra)
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