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NABE: Growth to resume for remainder of year

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NABE: Growth to resume for remainder of year

Survey of economists predicts recovery from Q1 contraction.

Economists at NABE believe that the US economy will recover quickly from its first quarter blues, although expectations for annual 2014 were revised downward slightly.

The panel forecasts quarterly economic growth for the balance of 2014 to be stronger than was expected in March. Panelists now expect the annualized rate of real GDP growth to jump to 3.5% in the second quarter of 2014 and to equal or exceed 3% for each quarter through the end of 2015. The median forecast reflects the view that 1.2 percentage points of second-quarter growth is due to the “rebound effect” of activity that was postponed because of unusually severe winter weather in the first quarter.

On an average annual basis, the median real GDP forecast for 2014 is for a 2.5% increase—weaker than the 2.8% projection reported in March’s survey following a 1.0% contraction in the first quarter. Nonetheless, the marked-down forecast would still represent stronger economic growth than the 1.9% GDP growth rate realized in 2013. The median forecast for 2015 is 3.1%—unchanged from March’s forecast.

"The median forecast reflects the view that 1.2 percentage points of second-quarter growth is due to the “rebound effect” of activity that was postponed because of unusually severe winter weather in the first quarter."

In contrast, sentiment regarding the labor market has become more upbeat. Nonfarm payrolls are expected to post an average monthly gain of 209,000 in 2014, a marked improvement from the expectations of only 188,000 net new jobs in the March survey. The pace of job creation is expected to hold steady at 209,000 per month in 2015. Likewise, the unemployment rate is expected to fall to an average of 6.2% in 2014 and decline further to 5.9% in 2015. Expectations for compensation growth are unchanged from the previous survey, with compensation per hour expected to rise at a 2.0% pace this year and 2.5% next year. 

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“The majority view is that the Federal Reserve will terminate its long-term asset purchase program by the end of 2014 and begin to raise the federal funds rate in 2015,” according to NABE Outlook Survey Chair Timothy Gill, deputy chief economist of the National Electrical Manufacturers Association. “Nonetheless, interest rates are expected to rise only modestly in the near term. The panel’s median forecast puts the federal funds rate at only 0.75% and the 10- year Treasury yield at only 3.75% by the end of 2015.” 

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