Business economists expect the recovery to accelerate at the end of the year and into 2014 as politicians are likely to avoid another government shutdown.
The economy still faces challenges, the National Association for Business Economists said Monday. But most participants in the group’s quarterly survey expect there will be enough growth for the Federal Reserve to start reducing a key stimulus program in the first half of next year.
The economy will grow 2.1 percent this year, up from a September forecast of 1.9 percent, the economists said. Growth will increase to a 2.8 percent annual rate next year, down slightly from the September median projection of 3 percent.
The forecast was compiled last month. On Friday, the Labor Department said that the unemployment rate had fallen to a five-year low of 7 percent in November amid surprisingly robust job growth of 203,000.
The economy has averaged a little more than 200,000 jobs a month for the past four months.
The business economists forecast job growth of nearly 200,000 a month next year. They said the unemployment rate would stay at about 7 percent.
October’s 16-day partial government shutdown probably will drag down economic growth in the last quarter of this year. But the group’s survey participants said it was unlikely there would be another shutdown in January, when the latest short-term federal spending bill expires.
Prices are expected to rise next year but remain below the Fed’s annual target of 2 percent inflation. Combined with stronger growth, most of the survey’s respondents said they expected the Fed to start reducing its $85 billion monthly bond-buying program in the first half of 2014.
After Friday’s strong jobs report, some analysts said Fed policymakers could vote to taper the purchases as soon as their meeting next week.
Source: MCT Information Services