Business Economists See GDP Growth, Healthier 2014
WASHINGTON -- The National Association for Business Economics expects the pace of economic growth to continue to pick up the remainder of this year and accelerate in 2014, finds its quarterly outlook, released today.
The 51 panelists who participated in the survey taken this month “expect the pace of economic growth to accelerate,” said survey chairman Timothy Gill, deputy chief economist at the National Electrical Manufacturers Association. While the shutdown of the federal government at the outset of the fourth quarter cost the economy $23 billion, the economy has shown resilience, he said.
The panelists project 2.8% growth in gross domestic product when data are collected for 2014, higher than the 2.1% pace they see for this year. “The U.S. economy is likely to experience some headwinds in 2014,” Gill said, that could keep it from achieving an even higher level of growth.
They see the Federal Reserve cutting back on its policy of quantitative easing, nonfarm payrolls increasing by 200,000 per month in 2014 and the unemployment rate falling to 7% on average.
They expect prices will rise “but inflationary pressures to remain contained.”
Among the highlights of the NABE outlook:
Real GDP for 2013 will be higher than projected a year ago and accelerate in 2014. When data are collected for this year, the rate is likely to be 2.1%, not the 1.9% forecast. 2012 GDP was 1.7%.
Labor markets will improve. Nonfarm payrolls will post an average monthly gain of 177,500 for 2013 when all the data are collected compared to 183,000 in 2012. The panelist project that figure will be 197,000 next year. 2013 will show an average monthly unemployment rate of 7.5% while next year’s figure will be 7%. “Affordable Care Act provisions are expected to trim 10,000 [jobs] from monthly payroll growth in 2014,” the report says.
Tighter fiscal policy [less government spending] is playing a role in lowering the expectations for near-term economic growth. Three-quarters of the panelists think the partial shutdown of the federal government hurt real GDP growth. Even so, most think the impact modest, costing the economy only 0.5% growth. Meanwhile, 88% of the panelists foresee additional sequestrations cuts of some form next year but 76% see it costing the economy 0.5% growth.
- Fiscal restraint [less government spending] may temper growth but is contributing to a smaller deficit. When the data are collected the economists expect to see government spending will have declined 2% in 2013 and another 0.5% in 2014.
- The Fed will slow its quantitative easing efforts in the first half of next year. Sixty-two percent the panelists expect to see those efforts begin the first half; another 30% think that won’t occur until the second half.
- Panelists have lowered their expectations for consumer spending growth. Personal consumption expenditures have been reduced to 1.9% for this year and 2.4% next year from September projections of 2.0% and 2.6%. However, they don’t expect this to extend to the automotive sector with 15.5 million light vehicles sold this year and 16.1 million cars and light trucks sold in 2014.
- Panelists project 2014 will have a higher industrial production rate next year. They lowered their expectations for this year’s numbers to 2.4% from 2.5% but see growth next year at 3.1%.
- “Panelists were clearly surprised by the strength in equities this year,” NABE reports, and have revised their predictions for stock markets performance next year to a 6.1% increase next year after gaining 5% this year.
SOURCE: National Association for Business Economics
Published by The Business Journal, Youngstown, Ohio.
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