A group of 13 chief economists from among North America’s largest banks believe economic growth will see a slight summer slump, before accelerating later this year and into 2014 as external pressures and fiscal drag ease.
The Economic Advisory Committee of the American Bankers Association forecast inflation-adjusted GDP growth for 2013 will be 2.1 percent over the course of the year and it’s expected to increase to 2.8 percent in the first half of 2014.
The bank economists believe the housing market has finally entered a sustainable recovery and will be gaining significant strength this year, with improving construction levels and rising home sales and prices. The committee forecast is that home prices nationwide will rise solidly and residential investment will increase 15 percent in 2013.
Consumers are also on a stronger financial footing and have regained confidence. The group believes consumer spending will support economic growth over the next two years.
“Higher equity prices and rising home values, along with declining gas and energy prices, have helped consumers cope with rising taxes and reduced federal spending,” Scott Anderson, committee chairman and Bank of the West chief economist, said. “The wealth effect created by rising home values will boost consumer sentiment and spur increased spending.”
The committee believes federal tax and spending policy will exert a smaller drag on growth over the course of next year. The committee’s forecast is for the federal deficit to fall to $650 billion in fiscal year 2013 (down from $1.1 trillion in fiscal year 2012) and below $600 billion in fiscal year 2014.
You can view a one-minute video summary of the economists' report here.