Washington D.C.—Business forecasters maintained their rosy view of the U.S. economy in 2014, predicting three per cent growth by the second quarter of next year, low inflation and improving employment.
The top economists surveyed by the National Association of Business Economics between Aug. 8 and Aug. 20 also said there’s an 80 per cent likelihood the pickup in growth will prompt the Federal Reserve to trim its monthly $85 billion purchases of mortgage bonds and Treasury bills next year.
The NABE’s 43 respondents said in a report released Monday that there’s a 45 per cent chance the Fed will begin its so-called “tapering” as early as this year.
But economists trimmed their expectations for the second half of 2013 since the last survey, in May.
The economists predicted that real gross domestic product would grow at a 2.3 per cent annualized rate in the third quarter through September, down from 2.5 per cent seen earlier; and 2.6 per cent in the fourth quarter, down from 2.8 per cent seen earlier. They were less optimistic about consumer spending, industrial production and private investment in nonresidential structures, equipment and software.
The economists’ slightly more pessimistic views were likely affected by the government initially reporting in July that second-quarter GDP grew 1.7 per cent. On Aug. 29, the Commerce Department revised the figure sharply higher for the April-June quarter, to 2.5 per cent.
“It’s fair to assume that they reduced their outlook for GDP because they had seen weaker business investment across the board,” said Ken Simonson, chief economist of the Associated General Contractors of America and an NABE analyst who helped compile the report. “The big takeaway is that the forecast now, like in May, is for gradually improving conditions, getting up to … growth of 3 per cent in 2014 and holding there.” The last time the economy grew more than 3 per cent over one year, on average, was in 2005.
NABE economists predicted that the consumer price index will grow just 1.3 per cent in 2013 and 1.7 per cent in 2014 when excluding volatile food and energy prices. The unemployment rate is seen falling to 7 per cent next year from 7.5 per cent this year, with the economy adding on average 199,000 non-farm jobs a month next year.