Business Economists Upbeat on Consumer Spending
WASHINGTON -- A group of 49 business economists sees the U.S. economy growing at a 2.4% rate this year and 3% in 2014.
In a report released Monday, the National Association for Business Economics forecasts that when the statistics are tabulated for 2013, they will show that Gross Domestic Product, or “the economy,” will have grown 2.4% and when those for 2014 are tabulated they will show 3% growth.
The results would be even better, the economists said, if Congress and the president hadn’t agreed to the sequester or across-the-board cuts in federal spending.
“The panelists suggest an even stronger decline in government spending this year relative to last could negatively affect GDP growth, said Nayantara Hensel, chairman of the NABE Outlook Survey and a professor of industry and business at National Defense University.
Hensel also said the 49 economists do not foresee a significant increase in inflation this year or next and “suggest that the federal funds rate will remain unchanged” through the end of 2014.
Other highlights of what they see the remainder of this year and in 2014:
- The panelists see real growth continuing with the third quarter attaining a 2.5% rate and fourth-quarter growth reaching 2.8%. Growth during the second half of next year is projected to reach 3.1%.
- Reduced federal government spending, compared to last year, is less, this restraining the growth of the economy, the business economists note. The sequester, should it continue, will have less effect on the economy next year, they suggest.
- The economists like what they see about trends in consumer spending, which constitutes roughly 70% of the economy. They see personal expenditures rising 2.3% this year and 2.6% next year, both of which surpass the actual rate in 2012 of 1.9%. They predict sales of light vehicles will reach 15.4 million this year and 15.9 million next year. By comparison, actual sales in 2012 were 14.4 million.
- They revised their figures upward for industrial production this year to 3.1%, higher than they 2.5% they saw in last February’s survey, and 3.5% for 2014.
- On the down side, the association sees the growth of nonresidential equipment and software falling to 5.3% growth after sustaining a rate of 6.9% last year. The economists see this segment returning to nearly its 2012 rate in 2014 when they predict it will be 6.8%.
- Home remodeling and housing starts give them cause for optimism as they see residential investment growing 15% this year and again next year, higher than the 12.1% turned in last year. Housing starts should reach one million this year and another 1.18 million should be recorded in 2014. Only 780,000 starts were recorded last year.
- The Federal Housing Financing Agency reported the price of houses should rise 4.4% between the fourth quarter of last year and the fourth quarter of 2013, an encouraging sign, the economists say. In an earlier survey they predicted a 3.5% increase. As for owners remodel and update their residences, the rates of investment this year and next, 4.6% and 5.2% respectively, would be lower than the actual 10.8% rate recorded for 2012.
- The unemployment rate will continue to fall, wages will rise as will output per hour or productivity. The unemployment rate will average 7.6% for the year with it dropping to 7.5% during the third quarter and 7.4% during the fourth. It will continue to fall next year and reach 6.8% sometime during the fourth quarter of 2014. Where nonfarm compensation rose only 1.5% in 2012, the economists see that pace picking up and reaching 2.3% this year and 2.7% next year.
- Wage increases will not cause inflation to accelerate, the National Association for Business Economics says, with the Consumer Price Index rising only 1.9% between the fourth quarter of 2012 and the last quarter of this year. They do not foresee ”a substantive increase in oil prices” the remainder and next year or during 2014.
- With rising corporate profits will come rising corporate taxes, NABE economists say, corporations paying 5.3% more in taxes this year and 7.5% more next year.
SOURCE: National Association for Business Economics.
Published by The Business Journal, Youngstown, Ohio.
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