As a long-time member of the National Association of Business Economics, I pay close attention to their forecasting survey. Here is the bottom line on the latest survey, which was just released this morning:
- The NABE Outlook Panel of 45 forecasters continues to predict moderate real GDP growth through 2012. Economists expect the economy to grow 2.4 percent in 2012, with GDP growth slightly stronger in the second half of the year than in the first.
- Employment growth brightens. Panelists increased their anticipated average monthly job change to 170,000 in 2012, which would result in an average annual unemployment rate of 8.3 percent. NABE forecasters expect stronger job growth in 2013 with the unemployment rate falling an additional half percentage point to 7.8 percent.
- Consumer spending to remain subdued. Even with higher employment forecasts, real consumer spending is forecast to increase only 2.1 percent this year and 2.3 percent in 2013. This rate remains below the historical norm of 2.8 percent and is consistent with a positive but below-trend recovery. Light vehicle sales are anticipated to grow at a solid pace of 14 million units this year and 14.6 million units in 2013, up from 12.7 million units in 2011.
- Housing starts are expected to increase 19 percent in 2012. The economists surveyed expect housing starts to reach 700,000 units in 2012, up from 610,000 in 2011 and an upward revision from the November forecast. The forecast for 2013 shows continued improvement, with housing starts reaching 850,000 units. Correspondingly, real residential investment is forecast to increase 6.6 percent in 2012, slightly higher than the 4.3 percent predicted in November, and then strengthen further, rising 10 percent in 2013. The projection for home prices in 2012 was lowered slightly from a projected increase in the FHFA index of 0.9 percent (Q4/Q4) in the November survey to home prices remaining unchanged in the February survey. In 2013 home prices are expected to increase slightly more than 2 percent.
- Panelists continue to forecast strong business spending growth. The outlook for spending on real nonresidential equipment and software in 2012 was marginally revised upward to 8.1 percent, and panelists forecast a lower but still solid 7.3 percent in 2013. The projection for real spending on nonresidential structures for 2012 was lowered slightly from that in the November survey, to 4.2 percent, but in 2013 the growth rate is expected to pick up to 5.1 percent. Industrial production is expected to increase moderately at 3.5 percent in 2012 and at 3.3 percent in 2013.
I have argued for many months that this recovery is sustainable but relatively weak. That is because it is a de-leveraging recovery. It takes time to work off debt. This also explains why consumer spending will remain subdued and that average unemployment for 2013 is expected to still be a high 7.8%.
I was also not surprised that there is agreement on the continued strong growth in business spending, as business was never as highly-leveraged as the consumer.
But, I am surprised by the optimistic outlook for housing and plan to study this more. Hopefully, I'm wrong, and they're right!
