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NABE Panel Sees Economy Making More Gains in 2014
WASHINGTON -- The economy will continue to pick up, but at a faster pace, to 3.0% next year from 2.3% this quarter, a panel of business economists said in their macroeconomic forecast released today.
The 43 economists, members of the National Association for Business Economics, expect “inflation to remain slow and the labor market to show improvement,” reports Nayantara Hensel, chairwoman of the NABE Outlook Survey conducted Aug. 8 through 20. Hensel is a professor of economics at National Defense University.
They see inflation running at 1.6% this year and accelerating to 2.1% by the end of next year.
By year-end, the panel sees the civilian unemployment rate at 7.5% and at the end of 2014 7%. It stood at 8% last Dec. 31.
The panel assigned an 80% probability to the Federal Reserve reducing its asset purchase program next year and a 45% probability that the Fed will reduce both its monthly purchase of mortgage-backed securities and Treasuries this year.
The residential housing market will continue to rebound, both the sales of existing houses and new construction, although the rate of increase in the price of houses will slow next year.
The economists see residential investment growing at a 13.8% clip this year, an increase from the 12.1% rate recorded last year, and that it will reach 14% next year. When data are collected for all of 2013, the panelists expect housing starts will number 950,000 and 1.16 million in 2014, both figures an improvement on the 780,000 starts recorded in 2012.
Their optimism is tempered by rising mortgage and their expectation the Fed will slow its monthly purchase of assets that include mortgage-backed securities.
The NABE panel sees consumer purchases will “continue to grow slowly in 2013 and then expand in 2014,” Hensel said.
Nearly half of the panel, 46%, said this year’s cuts in federal spending, a result of sequestration, “will reduce the growth rate of real GDP [gross domestic product, often called the economy] in the fourth quarter by a half percentage point or less.”
The economists project the deficit for fiscal 2013, which ends Sept. 30, will turn out to be $680 billion and that the deficit will be even less in fiscal 2014, $650 billion. Both figure are considerably less than the $1.087 trillion recorded in fiscal 2012. Part of the decrease is the result of the federal government spending less, 2.1% in fiscal 2013. They expect federal spending to decline at a “milder rate of -0.5% in [fiscal] 2014.”
When the figures are computed for 2013, the economist said, personal consumption is likely to be 2% higher than 2012 and grow at a 2.6% rate next year.
The panelists are less optimistic than they were in the May survey about private investment in commercial structures, equipment and software. Investment in nonresidential structures is estimated to decline by 1.1% over 2012, a significant contrast to the 4.6% growth they foresaw last May and from the 10.8% growth this section enjoyed in 2012. However, the panelists project 4.6% growth in nonresidential structures in 2014 (down from the 5.3% forecast last May) while they see nonresidential equipment and software growing 6% next year, down from 6.8% last May.
Published by The Business Journal, Youngstown, Ohio.
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