Business economists have lowered their growth estimates for 2012 and 2013, and remain cautiously optimistic about growth prospects for next year. According to the latest Outlook Survey from the National Association for Business Economics (NABE), real GDP is expected to increase 1.9 percent in 2012 and 2.4 percent in 2013. This is down from 2.4 percent and 2.8 percent in the May survey.
The largest driver of growth is expected to be residential and non-residential investment, with modest gains in consumer spending and a slight narrowing of the trade deficit. Government spending will continue to be a drag on growth. Hiring should also be modest (averaging 155,300 each month next year), with the unemployment rate not much different than what it is today.
It is worth noting that this forecast assumes that the U.S. will not go over the fiscal cliff.
Specifically, the respondents said the following about the fiscal cliff and its possible solutions:
- 59 percent expect for the 2001 and 2003 tax cuts to be extended for one year for all income levels and 36 percent felt that they would be extended only for those making less than $250,000 per year.
- 59 percent also believe that the temporary payroll tax cut will be allowed to expire at year’s end.
- 77 percent expect for legislators to “diminish” the effects of sequestration resulting from the Budget Control Act in some way.
If the fiscal cliff cannot be averted these forecast figures would change dramatically. While the NABE survey does not address it directly, failure to address the fiscal cliff will be a drag on job creation and have a negative impact on economic growth moving foward.
Chad Moutray is chief economist, National Association of Manufacturers.