NABE Outlook March 2014
Summary: “Despite a challenging start to the year in which adverse weather conditions will likely shave nearly one half of one percentage point from first-quarter real GDP growth, NABE’s March 2014 Outlook Survey panel expects the pace of economic expansion to accelerate this year—and next,” said NABE President Jack Kleinhenz, chief economist of the National Retail Federation. “The consensus of the panelists is that real GDP will advance at a weak 1.9% annualized rate in the first three months of the year but pick up by year end to a pace of more than 3%. On an annual average basis, real GDP growth is forecasted to increase from 1.9% last year to 2.8% this year, and to 3.1% in 2015. 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.”
“The NABE Outlook Survey panelists anticipate the Federal Reserve will continue to taper its long-term asset purchases throughout 2014, with the majority of the panel expecting purchases to end entirely in the fourth quarter,” according to Survey Chair Timothy Gill, deputy chief economist at the National Electrical Manufacturers Association. “Higher interest rates also appear to be in the cards, as one-third of respondents expect a hike in the federal funds rate this year and more than half forecast an increase in 2015. Indeed, panelists name rising interest rates as the biggest threat to the economic expansion over the next two years. Even so, when asked to estimate the probability of a recession in the next two years, the median response was only 15%.”
The March 2014 NABE Outlook presents the consensus of macroeconomic forecasts from a panel of 48 professional forecasters (see last page for listing). The survey, covering the outlook for 2014 and 2015, was conducted February 19-March 5, 2014. The NABE Outlook Survey originated in 1965 and is one of three surveys conducted by NABE; the others are the NABE Industry Survey and the NABE Economic Policy Survey. Founded in 1959, the National Association for Business Economics is the professional association for those who use economics in their work. NABE has over 2,500 members and 41 chapters nationwide. Timothy Gill, National Electrical Manufacturers Association (chair); Craig Alexander, TD Bank; Robert Kleinhenz, Los Angeles County Economic Development Corporation; Ken Simonson, Associated General Contractors of America; and Richard Wobbekind, Leeds School of Business, University of Colorado at Boulder, conducted the analysis of survey responses for this report. The views expressed in this report are those of the panelists and do not necessarily represent the views of their affiliated companies or institutions. This report may be reproduced in whole or in part with appropriate citation to NABE.
- Annual average GDP growth in 2014 is expected to be stronger than projected in December’s survey— 2.8% compared to 2.5%. This is despite the median view that unusually severe winter weather will subtract 0.4 percentage points from annualized real GDP growth in the first quarter of the year. On a fourth quarter to fourth quarter basis, however, current expectations are slightly lower than in December. By either measure, panelists forecast economic growth to accelerate to over 3% in 2015. On a quarterly basis, the panelists expect real GDP growth to rise steadily from a 1.9% annualized rate in the first quarter of 2014 to 3.2% in the third quarter of 2015.
- Further labor market recovery is anticipated. Nonfarm payrolls are forecasted to post an average monthly gain of 188,000 for all of 2014, slightly below the 194,000 recorded last year. Panelists anticipate stronger job creation of 205,000 per month in 2015. The unemployment rate is expected to average 6.4% in 2014, down a full percentage point from 2013, and decline to 6.1% in 2015.
- The Fed is expected to end its purchases of long-term Treasury and mortgage-backed securities this year. Fifty-seven percent of panelists believe asset purchases will end in the fourth quarter of 2014, in line with current Fed guidance, while 25% expect asset purchases will cease prior to the fourth quarter of 2014. Seventeen percent expect the asset purchase program will extend beyond 2014, although only 2% believe it will persist into 2016 or later.
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