The American economy expanded in the third quarter, and growth will continue through the end of 2014, a recent survey says. The National Association for Business Economists (NABE) predicts a 3% rise in real gross domestic product in the third quarter followed by 3.1% expansion in the final three months of the year
“Respondents to NABE’s September 2014 Outlook Survey expect the pace of economic growth to steady following an unusually high degree of volatility in the first half of the year,” says NABE President-Elect John Silvia, chief economist at Wells Fargo.
After GDP declined in the first quarter during a business-stifling winter, economic performance improved considerably in the second quarter, growing at an annualized rate of 4.6%. Despite the ups and downs, the 46 economic forecasters surveyed by NABE believe that real GDP growth for 2014 will reach 2%. While that growth rate is a decline from the 3.1% acceleration experienced in 2013, forecasters are optimistic about 2015. “The consensus of the panel is that economic growth will rebound to 2.9% in 2015,” says Silvia. The Federal Reserve sees the economy growing between 2% and 2.2% in 2014, and between 2.6% and 3% next year.
Meanwhile, NABE survey respondents delivered positive news about employment and compensation. Forecasters expect monthly nonfarm payroll gains to average 208,000 this year and 211,000 in 2015. If such numbers are attained, the unemployment rate could drop to 5.7% by the end of 2015, NABE said. At the same time, survey respondents predict that compensation will grow 2.8% in 2014 and 2.6% in 2015.
The steady economic performance will compel the Federal Open Market Committee to raise the federal funds rate in the second or third quarter of next year, the survey forecasts. Most panelists believe the federal funds rate will climb from the current zero to .25% range to 0.845% by the end of next year. “In contrast, the 10-year Treasury note yield is now forecasted to be 3.5% at the end of 2015, lower than the 3.75% expected in June,” said NABE Outlook Survey Chair Timothy Gill.
Additionally, NABE analysts say consumer spending will grow 2.3% in 2014 and just below 3% in 2015. Housing construction growth, the survey shows, will register 2.7% this year before dramatically rising 9.2% in 2015.