Economists with the National Association for Business Economics (NABE) expect the economy to pick up in the second half of this year. Yet, overall estimates for growth for 2014 as a whole have fallen over the course of the past few months, with activity starting off somewhat disappointing in the first quarter. Economists now estimate real GDP growth of 2.5 percent for this year, down from 2.7 percent in the March survey and 2.8 percent in the December survey. This implies growth exceeding 3 percent in each of the remaining three quarters this year. In addition, survey respondents anticipate 3.1 percent growth in 2015.
Looking at the manufacturing sector, business economists expect industrial production to accelerate this year, with current estimates of 3.7 percent for 2014. That would be an improvement from the 3.2 percent growth rate forecasted three months ago. These results are consistent with the mostly upbeat data seen in the latest NAM/IndustryWeek Survey of Manufacturers, which predicted 4.0 percent growth in manufacturing output through the end of this year and sales rising at their fastest pace in two years.
In terms of auto production, light vehicle sales should rise from an average of 15.5 million annualized units in 2013 to 16.1 million and 16.5 million in 2014 and 2015, respectively. Meanwhile, housing starts are anticipated to grow rapidly, particularly next year, up from an expected 1.03 million in 2014 to 1.30 million in 2015. Capital spending should improve, as well, with relatively healthy gains for fixed investments in nonresidential structures, equipment and software, and intellectual property products.
Labor market growth has picked up since the last survey, not unlike the data seen in the most recent jobs report. Those taking the survey predict that nonfarm payrolls will average 209,000 per month in 2014, up from 188,000 each month in the last survey. With that said, business economists still predict a slow decline in the unemployment rate, averaging 6.2 percent this year.
A number of special questions focused on the Federal Reserve Board and monetary policy. Over ninety percent felt that the Fed would end its asset purchase program by year’s end, with the vast majority feeling that it would end in the fourth quarter. Similarly, 86 percent felt that short-term rates would rise in 2015, with over half anticipating the federal funds rate to increase in the second half of next year. In terms of global worries, the majority of respondents feel that the Russia/Ukraine crisis will hurt growth in Europe (84 percent) and that China will face a debt crisis in the next few years (51 percent). At the same time, nearly half suggest that deflationary concerns will hinder the economic recovery in Europe.
Chad Moutray is the chief economist, National Association of Manufacturers. Note that he was one of the panelists for the NABE Outlook Survey.