Economists forecast slow growth in new year

— A group of business economists believe the country will see modest growth in 2013 with a further rebound in housing helping to offset weakness in business investment.

In its latest survey of top forecasters, the National Association for Business Economics says it is looking for the U.S. economy to grow in2013 by 2.1 percent after 2.2 percent growth in 2012. That would continue the pace of slow growth the country has seen since the recession ended in mid-2009.

A slow growth rate is too weak to make a significant improvement in unemployment. The association’s economists believe unemployment will average 7.7 percent for all of next year, right at the level it reached in November.

The 48 economists on the National Association of Business Economics survey panel had essentially the same outlook as their previous forecast in October. While the group has modest expectations for 2013, it does see growth slowly improving as the year progresses.

The economists forecast growth in the country’s 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 slow-down, the economists believe, will reflect the disruptions caused by Hurricane Sandy, which slammed into the Northeast on Oct. 29.

About half of the economists surveyed believe Sandy will cut growth by 0.2percentage point to 0.5 percentage point in the current quarter and about one-third of the survey panel believe rebuilding from the storm will increase growth by a similar 0.2 percentage point to 0.5 percentage point range in the first three months of next year.

The association’s economic panel is looking for GDP growth at an annual rate of1.8 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 next year.

Nayantara Hensel, head of the National Association of Business Economics panel and a business professor at the National Defense University in Washington, D.C., said part of the optimism that growth will be improving is a belief that the government will come to a resolution of the “fiscal cliff” - the name being given the sharp increases in taxes and spending cuts that will hit in January if Congress and the Obama administration fail to reach a budget deal.

“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,” Hensel 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 new 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, 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 association 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 - below the Fed’s 2 percent target. Oil prices are expected to average $93.20 per barrel by 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.

Business, Pages 23 on 12/18/2012

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