Economists forecast moderate 2013 growth

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WASHINGTON — Business economists believe the country will see modest growth in 2013 with strength coming from a further rebound in housing that 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 percent after 2.2 percent growth in 2012, continuing the same tepid growth the country has seen since the recession ended in mid-2009.

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

The 48 economists on the survey panel had essentially the same outlook as their 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 percent in the current October-December quarter, down from 2.7 percent growth in the July-September period.

Part of that slowdown, the economists believe, will reflect the disruptions caused by Hurricane Sandy.

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 panel believe rebuilding from the storm will increase growth by a similar range in the first three months of next year.

The panel predicts GDP growth at an annual rate of 1.8 percent in the first quarter, followed by rates of 2.4 percent in the April-June quarter, 2.6 percent in the third quarter and 3 percent in the fourth quarter.

Nayantara Hensel, the head of the association’s panel and a business professor at the National De­fense University in Washington, said part of the optimism on growth is because of a belief that the government will come to a resolution of the “fiscal cliff.”

“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 percent next year. Builders are expected to break ground on 930,000 homes in 2013, up 21 percent from this year, while home prices are expected to increase 3.5 percent, after an expected 3 percent 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 percent, down from an expected 8.5 percent gain in 2012. Both years are below the 10.2 percent average increase over the past 20 years.

Among the other predictions in the latest 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 percent. That is below the Fed’s 2 percent 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 percent at the end of next year, up from 1.70 percent 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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