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Economists Forecast Stronger U.S. Growth

(3/25/2014)

Spurred by several improving sectors, GDP in the U.S. will likely expand by 2.8% this year and 3.1% in 2015, according to a closely-watched survey of economists. The results of the new survey, which was conducted by the National Association for Business Economics (NABE), demonstrate greater optimism among economists, whose previous consensus forecast called for 2014 GDP expansion of about 2.4%. The economists surveyed also expect consumer spending to jump 2.6% this year – a key factor in growth.

“Conditions in a variety of areas – including labor, consumer and housing markets – are expected to improve over the next two years, while inflation remains tame,” said NABE President Jack Kleinhenz, in a statement.

As the economy improves, 57% of survey respondents now believe the Federal Reserve will end its bond purchases in the fourth quarter of this year. About 25% think the Fed will be more aggressive in reducing its bond-buying, while 17% predict QE3 will be wound down completely sometime in 2015. About 33% of surveyed economists said the Fed could raise short-term interest rates in 2014, though most analysts see a hike next year. Fed Chair Janet Yellen suggested last week that the central bank would raise the short-term rate six months after QE3 ended. Initially, higher rates would make borrowing more expensive, although economists generally argue there are long-term benefits to a gradual hike.

While economists have largely upgraded their 2014 forecasts, they remain cautious about the first quarter of this year. The consensus Q1 GDP figure is 1.9% growth, NABE said, with expansion slowed by an excessively snowy and cold winter in many parts of the U.S.



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