Business economists are shrugging off a winter economic slowdown.
A poll of 50 professional forecasters by the National Association for Business Economics estimated a 3.1% advance for gross domestic product this year, which would be the best performance in a decade and a marked improvement from the 2.2% to 2.4% range of the prior three years.
“Healthier consumer spending, housing investment and government spending growth are expected to make outsized contributions to the projected acceleration in overall economic activity,” said John Silvia, chief economist of Wells Fargo and NABE president.
NABE released the survey, conducted Feb. 25-March 12, amid a string of weak real-time economic data. The Commerce Department on Friday said GDP, the broadest measure of goods and services produced across the economy, expanded at a seasonally adjusted annual rate of 2.2% in the fourth quarter, a sharp slowdown from the third quarter’s 5.0% pace.
And GDP growth estimates for the first quarter tumbled last week after a disappointing report on business spending. Consumer outlays also appears to be off to a sluggish start this year, hampered in part by bad weather and a disruption at West Coast ports.
No matter. Economists polled by NABE expect a strong labor market and cheaper gasoline to fuel consumer spending, a key economic driver.
Last March, the forecasters expected 2.8% growth for 2014. It was 2.4%.
The latest survey upgrades nonfarm payroll growth to an average of 251,000 per month this year and expects the unemployment rate to average 5.4% for the year. Oil is expected to just creep up to $61 per barrel at the end of the year, helping keep inflation in check at a paltry 1.2%.
The U.S. added an average of 260,000 jobs a month last year and the unemployment rate in December was 5.6%. Oil peaked near $99 in mid-2014 before crashing to just over $45 earlier this month. Inflation was flat last month.
The stronger economic backdrop is one reason the Federal Reserve is expected to start raising interest rates in the second or third quarter of the year. The federal funds rate, pinned near zero since the end of 2008, is seen reaching 0.75% by the end of the year and 2% by the end of 2016. The survey was conducted prior to the latest Fed meeting, where officials opened the door to raising rates by midyear.
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