Forecasters expect recovery to accelerate

A prominent coalition of professional economic forecasters is predicting more modest growth in 2013, but they expect the rate of growth to accelerate later in the year.

In its year-end survey, the National Association for Business Economics (NABE) said the consensus view from its panel of forecasters shows gross domestic product expanding this year at an average annual growth rate of 2.1 percent. That’s little changed from the modest 2.2 percent pace of 2012.

The December 2012 NABE Outlook presented the consensus of macroeconomic forecasts from a panel of 48 professional forecasters. The survey, covering 2012 and the outlook for 2013, was conducted Nov. 15-28.

So, the survey was conducted before the economists knew the outcome of the federal fiscal cliff drama.

“The panelists expect modest growth in the economy in 2013 as a whole, which accelerates steadily as the year progresses,” said Nayantara Hensel, Ph.D., chair of the NABE Outlook Survey and professor of industry and business at National Defense University. “The panelists forecast little improvement in consumption growth, significantly reduced growth in investments in nonresidential structures, equipment and software, and reduced growth in corporate profits and industrial production. Nevertheless, on a positive note, the panelists suggest that the improvement in the housing market is likely to continue. They do not anticipate a significant increase in inflation next year and forecast some improvement in the labor market. Although the bulk of the panelists suggest that Hurricane Sandy may reduce fourth quarter 2012 GDP growth, it is likely to increase first-quarter 2013 GDP growth. The panelists also suggest some reduction in the U.S. 2013 federal budget deficit relative to the 2012 federal budget deficit. A portion of the panelists expect that the European financial crisis will worsen in that Spain, Italy, and Ireland may require bailout packages (or additional bailout packages) and one-fifth of the panelists suggest that Greece could break away from the euro currency in 2013.”

The research for the report was conducted by Clare Zempel of Zempel Strategic, a business economist and investment strategist based in Fox Point, Wis.

The economists responding to the survey include forecasters from Bloomberg LP, Cassidy Turley, Eaton Corp., FedEx Corp., Ford Motor Co., J.P. Morgan, Moody’s Analytics, Northern Trust Bank, the U.S. Chamber of Commerce and Wells Fargo Bank.

The panelists are optimistic that improvements in the national housing market will continue. The panelists forecast that housing starts will continue to increase in 2013, and that home prices will rise, both of which are consistent with their forecasts of continued growth in residential investment in 2013.

Moreover, home prices were forecast to increase by 3 percent in 2012 and by 3.5 percent in 2013, which is a substantial rebound from the 2.9-percent fall in house prices in 2011, as measured by the change in the Federal Housing Finance Agency (FHFA) index of home prices.

They also forecast that the annual average civilian unemployment rate will be 7.7 percent in 2013, which is lower than their annual average forecast for 2012 of 8.1 percent, and which continues the downward trend from the annual average of 9 percent unemployment in 2011.

Non-farm employment is expected to grow from their 2012 forecast of an average increase of jobs per month to an increase of 165,000 jobs per month in 2013. Wages and benefits also are expected to accelerate slightly, as measured by an increase in forecasted growth in non-farm business compensation per hour, from a forecast of 2.4-percent growth in 2012 to a forecast of 2.6-percent growth in 2013.

BizTimes Milwaukee will provide in-depth analysis about the year ahead in business in its annual Economic Trends special report to be featured in its Jan. 21 edition.

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