- James I. Clark III
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Economists Predicting Rosier Outlook
Economists are increasingly optimistic that certain elements of the economy will improve throughout 2012, although they are still cautious in their expectations on the overall pace of economic growth. According to the National Association for Business Economics (NABE), forecasters have increased their expectations for employment, new home construction and business spending this year. But they held on to their average prediction that America’s GDP will grow at a rate of 2.4 percent. That’s a slight improvement when compared with 2011; economists say the economy grew 1.6 percent last year.
GDP represents the economy’s total output of goods and services. The latest forecast is in line with one issued by the group last fall that called for the economy to grow 2.4 percent this year. Forecasters predict growth will be stronger in the second half of 2012 than it will be through June. NABE economists see the unemployment rate sticking at 8.3 percent this year. That’s improved from their November forecast of 8.9 percent and a sharp drop from October of 2009 when unemployment peaked at 10 percent. The economists expect job growth to accelerate in 2013, with the unemployment rate falling to 7.8 percent. GDP growth needs to be above three percent to reduce unemployment significantly.
Homebuilders are expected to break ground on 700,000 new homes this year, a 15 percent increase when compared with 2011. Another 850,000 are expected to be built in 2013.
The economists are also forecasting robust business spending growth in 2012, slightly raising their forecast to 8.1 percent growth this year. For 2013, spending is likely to slow slightly, but remain strong at 7.3 percent. Industrial production is expected to increase more or less 3.5 percent this year and 3.3 percent next year. Estimates for 2012 spending on new equipment and software rose to 8.1 percent from 8 percent, according to the NABE.
Despite a brightening forecast for employment, housing and business spending, the NABE Outlook Panel expects consumers to continue to save their money this year. They expect that spending will increase just 2.1 percent this year and 2.3 percent in 2013. The rate is below historical average of 2.8 percent, highlighting an economy that’s going in the right direction, but still sluggish.
The improved jobs outlook comes at the same time as larger gains in business investment and homebuilding than were anticipated.
Three consecutive months of accelerated job growth are sustaining the economic expansion that began in June 2009. Employers added 243,000 jobs in January, the highest number in nine months.
According to the study, Economists responding to the latest NABE Outlook Survey are seeing strength in a number of economic measures and have subsequently increased their expectations. Despite increases in a number of forecasts, however, economists remain guarded on US economic growth. Economists’ expectations for export growth have also weakened over the last four months. Collectively, forecast uncertainty among the economists appears to have diminished slightly over the last several months.”
In terms of exports, the economists expect 4.6 percent growth in 2012, compared with their November prediction of 6.1 percent. They also reduced their projection for 2012 import growth from 4.3 percent to 3.5 percent. Both rates are expected to improve next year.