Economists Forecast Modest Growth in 2013

WASHINGTON (AP) -- Business economists believe the country will see modest growth in 2013 with strength coming from a further rebound in housing which will help offset weakness in business investment.

In its latest survey of top forecasters, the National Association for Business Economics says it is looking for the economy to grow in 2013 by 2.1% after 2.2% growth in 2012. That would continue the same tepid growth the country has seen since the Great Recession ended in mid-2009.

Growth at that pace is not strong enough to make a significant improvement in unemployment. The NABE economists believe unemployment will average 7.7% for all of next year, right at the level it reached in November.

The 48 NABE economists on the survey panel had essentially the same outlook as their previous forecast in October. While they have modest expectations for 2013, they do see growth slowly improving as the year progresses.

The economists forecast growth in the gross domestic product, the economy's total output of goods and services, at 1.6% in the current October-December quarter, down from 2.7% growth in the July September period. Part of that slowdown, the economists believe, will reflect the disruptions caused by Superstorm Sandy, which slammed into the Northeast on Oct. 29.

About half of the economists surveyed believe Sandy will cut growth by 0.2 percentage point to 0.5 percentage point in the current quarter and about one-third of the survey panel believe rebuilding from the storm will increase growth by a similar 0.2-percentage-point to 0.5-percentage-point range in the first three months of next year.

The NABE panel is looking for GDP growth at an annual rate of 1.8% in the first quarter followed by rates of 2.4% in the April-June quarter, 2.6% in the third quarter and 3% in the fourth quarter next year.

Nayantara Hensel, head of the NABE panel and a business professor at the National Defense University in Washington, said part of the optimism that growth will be improving is a belief that the government will come to a resolution of the fiscal cliff. That's the name being given the sharp increases in taxes and spending cuts that will hit in January if Congress and the Obama administration do not reach a budget deal.

"The panelists believe that once there is greater clarity on budget and tax issues, you will see less uncertainty on the part of businesses and consumers," she said.

The panelists expect housing will once again be a standout performer with residential investment growing at an annual rate of 12% next year. Builders are expected to break ground on 930,000 new homes in 2013, up 21% from this year, while home prices are expected to increase 3.5%, after an expected 3% gain this year.

But the panelists look for business investment in equipment and software and structures to slow in 2013. They are also looking for after-tax corporate profits to show an increase of 5%, down from an expected 8.5% gain in 2012. Both years are below the 10.2% average increase over the past 20 years.

Among the other predictions in the latest NABE survey:

    • Employers will add an average of 165,000 jobs per month next year, a slight improvement from the 150,000 monthly job average so far this year.
    • Inflation will remain modest with the Federal Reserve's preferred inflation gauge rising just 1.8%. That is below the Fed's 2% target. Oil prices are expected to average $93.20 per barrel in December 2013, only a slight increase from $86.70 currently.
    • Longer-term interest rates will rise slightly with a 10-year Treasury note at 2.25% at the end of next year, up from 1.70% currently. The Federal Reserve is expected to keep short-term rates unchanged at a record low near zero for all of next year.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 17, 2012, at 3:41 PM, kthor wrote:

    that employment growth will be much lower after the obamaCare goes in effect ...

  • Report this Comment On December 17, 2012, at 5:12 PM, Darwood11 wrote:

    "Business economists believe the country will see modest growth in 2013."

    As I recall, these same people predicted modest growth for 2007 and 2008.

    My point? These people are damaged goods, and should not be believed. Yes, we may very well have modest growth in 2013, but using these economists as a "one stop" source for information we can bank on is really, really, dangerous to one's financial future. Certainly better than listening to the politicians and talking heads, but dangerous nonetheless.

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