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Growth Next Year Seen at 2.1 Percent, Housing, Jobs Better, NABE Survey Shows

Friday, December 21, 2012
By Diana I. Gregg

Forecasters see the U.S. economy growing modestly next year at 2.1 percent, with growth strengthening to 3 percent by the fourth quarter, the National Association for Business Economics said Dec. 17.

The new NABE forecast for real gross domestic product growth, based on predictions from 48 well-known economists, is nearly unchanged from the previous outlook released in October, which had growth at 2.2 percent next year, measured year over year. But forecasters now see somewhat stronger job growth and higher home prices along with softer business investment.

Measured from fourth quarter to fourth quarter, GDP is forecast to grow 2.4 percent next year, the same as in 2012.

In the survey, taken Nov. 15-28, unemployment is expected to drop to 7.7 percent next year after averaging 8.1 percent this year, and job growth will pick up to 165,000 a month from 156,000 this year. Both predictions are improvements from the October poll.

But business investment in equipment and software is now seen rising just 5 percent next year, while investment in structures expands 3.1 percent, weaker than thought previously.


Housing Recovery to Gain
“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,” said Nayantara Hensel, a professor with the National Defense University and chair of the NABE outlook survey. “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.”

The economists think home prices will rise 3.5 percent next year, as measured by the Federal Housing Finance Agency's index, on a fourth quarter to fourth quarter basis; they had a 2.8 percent increase in the previous survey.

The survey panel members trimmed their forecast for average oil prices to $93.2 a barrel next year, from $99.6 in the earlier poll.

There is no increase in inflation seen, as the consumer price index is expected to advance only 2.1 percent this year and next.

The federal budget deficit will narrow to $900 billion in fiscal 2013 from $1.3 trillion this year, somewhat more optimistic than the $950 billion in the October forecast.

A portion of the NABE forecasters expect the European crisis to worsen, with nearly half anticipating that Spain will need a larger bailout than previously announced and close to one-third expecting that Italy will receive a package next year. However, only one-fifth believe Greece will exit the euro zone.

By Diana I. Gregg

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