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Economists Foresee 3% Growth, Volatility in 2015
WASHINGTON -- Unemployment will fall to 5.7% next year and inflation will rise a tad as the economy rebounds to 3.0% growth in an environment of greater volatility.
That’s the consensus of 46 macro-economists who responded to a survey conducted between Aug. 25 and Sept. 9 for the National Association for Business Economics, the results of which were released today.
“Respondents to NABE’s September Outlook Survey expect the pace of economic growth to steady following an unusually high degree of volatility in the first half of [2015],” its president-elect, John Silvia, said in a prepared statement. Silvia is the chief economist of Wells Fargo.
The economists have revised their projection of economic growth this year downward to 2.0% because of weak conditions early this year, affected in part by a severe winter. The last outlook, released in June, forecast 2.5% growth this year. The economy grew 3.1% in 2013.
While they expect inflation to run 1.9% next year, which NABE termed a “largely subdued” rate, it exceeds the 1.5% recorded last year.
As jobs continue to be added to the economy, some 200,000 a month on average, the unemployment rate will fall to 5.7% and the Open Market Committee of the Federal Reserve System will raise interest rates the second or third quarter of 2015, said Timothy Gill, chairman of the association’s Outlook Survey. Gill is the deputy chief economist of the National Electrical Manufacturers Association.
The hike will also reflect rising inflation. “The median federal funds rate forecast at the end of 2015 is 0.845%, slightly higher than in June,” he said. In contrast, the 10-year Treasury note yield is now forecast to be 3.5% at the end of 2015, lower than the 3.75% expected in June.”
Other highlights include:
- After 2014 ends, the economists expect to find that the average number of nonfarm jobs added each month was 228,000, up from 209,000 in their forecast last June. They also expect to find that wages will have risen 2.8%, up from 2.0% in June.
- They expect to learn that consumer spending rose this year, but only 2.3%, less than the 2.9% they predicted in June.
- Two-thirds of the 46 economists surveyed say weak consumer spending next year will result from small raises in their paychecks. Besides finding it harder to obtain credit, consumers feel a greater need to save for retirement, thus deferring or forgoing spending.
- Despite watching their expenditures, consumers are not holding back on buying cars and light trucks, the economists say. Sales of light vehicles will reach 16.3 million units this year and increase to 16.7 million units in 2015.
The NABE panelists have raised their expectations for industrial production growth since last June to 4.0% from 3.7% and to 3.6% next year from 3.5%. In 2013, the rate of industrial production growth was 2.9%.
Construction of new houses does not look as promising as it did earlier, “reflecting unexpectedly weak residential investment this year,” NABE reports. Construction rose 11.9% in 2013, leading to optimism for this year. But 2014 is on pace to achieve only a 2.7% increase. The outlook for the price of residences sold appears static.
The inability of would-be buyers of house to obtain credit was the major factor in the slowing of that market, the economists say.
Source: National Association for Business Economics.
Published by The Business Journal, Youngstown, Ohio.
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