Economists with the National Association for Business Economics (NABE) expect real GDP growth of 2.8 percent in 2014, up from 2.5 percent predicted three months ago. This is true despite weather-related softness in January and February, with economists anticipating 1.9 percent growth in the first (or current) quarter. Respondents to the NABE Outlook Survey also predict 3.2 percent output growth for 2015, suggesting the U.S. economy will continue to accelerate into next year.
This is good news for manufacturers. Industrial production is expected to increase 3.2 percent and 3.4 percent in 2014 and 2015, respectively. This is mostly consistent with the positive outlook noting in the latest NAM/IndustryWeek survey. In terms of auto production, light vehicle sales should rise from an average of 15.5 million annualized units in 2013 to 16.0 million and 16.5 million units in 2014 and 2015, respectively. Meanwhile, housing starts are anticipated to grow to 1.07 million and 1.3 million this year and next.
A number of special questions focused on the Federal Reserve Board and monetary policy. Eighty percent of business economists expect the Fed’s quantitative easing program, with 57 percent anticipating the end of long-term asset purchases in the fourth quarter of 2014. In terms of short-term interest rates, the responses were more scattered, but more than half predict the federal funds rate to start to increase in 2015. Overall inflationary pressures are expected to stay under or at the Fed’s 2-percent goal, with consumer prices up 1.7 percent and 2.0 percent in 2014 and 2015, respectively.
Those taking the survey were asked about the biggest threats to the economic expansion, and the top choice was rising interest rates, cited by 27 percent of responses. This was closely followed by the regulatory environment (14 percent), financial instability in emerging markets (14 percent), and federal fiscal gridlock (11 percent).
Labor market growth has slightly decelerated since the last survey, as we have seen in recent jobs numbers. Nonfarm payroll growth should average 188,000 per month in 2014, down from the average of 197,000 in 2013. In the December survey, respondents had predicted 197,000 for this year. In 2015, business economists predict an average of 205,000 additional nonfarm employees each month.
Chad Moutray is the chief economist, National Association of Manufacturers. Note that he was one of the panelists for the NABE Outlook Survey.