WASHINGTON — For the third straight year, economists are only a bit more optimistic about prospects for growth and hiring than they were 12 months earlier.
So don’t expect 2013 to be the year to break out the bubbly.
Weighing on the new year’s fiscal forecast are ongoing debt problems in Europe; improving but unsteady growth in developing nations; and tremendous political uncertainty over taxes, debt and deficits in the United States. These all add up to expectations for another ho-hum year.
There is a twist that makes 2013 different than the two prior years, however. During 2011 and 2012, optimism was high that things were turning around, only to give way to a sobering reality later in the year.
“I think that when we look at 2013, maybe the overall growth rate is not going to be a whole lot different, but I am more optimistic that we will exit 2013 on a stronger note,” said Nigel Gault, chief U.S. economist for forecaster IHS Global Insight. “I think we have an underlying acceleration just starting up.”
That view of a slow start and strong finish is similar to a Dec. 17 forecast by members of the National Association for Business Economics, the group for economists who work for corporations and trade associations.
“The panelists expect modest growth in the economy in 2013 as a whole, which accelerates steadily as the year progresses,” Nayantara Hensel, who heads the outlook survey for the NABE, said in the report. “The panelists forecast little improvement in consumption growth, significantly reduced growth in investments in nonresidential structures, equipment, and software, and reduced growth in corporate profits and industrial production.”
The group also sees consumers still under duress and businesses reluctant to hire or invest. It’s not to say things will get much worse, but it’s not likely to get a whole lot better, either.
The Federal Reserve, in its Dec. 12 New Year forecast, expected growth in a range between 2.3 percent and 3 percent. That’s not spectacular, given the time that’s passed since June 2009 when the Great Recession ended. The Fed expected 2012 to close with annual growth no better than 1.8 percent.
Dragging against U.S. growth are concerns over Washington’s bitterly partisan fight over expiring tax cuts, deep across-the-board federal spending cuts, and how and when the debt ceiling gets raised so the federal government can keep borrowing to pay the bills it already owes.
Companies have postponed hiring and sat on their cash rather than invest it. And there’s the likelihood that lawmakers might try to undertake a sweeping revamp of the tax code in 2013, creating additional short-term uncertainty. As a result, spending and investment has been sidelined.
Housing is not out of the woods. But new and existing homes have seen price gains in several regions of the nation in recent months, creating a sense of optimism that’s been missing since the housing bubble burst in 2007.
And good news could soon beget better news, suggested Gault of IHS. Once housing accelerates, “we’ll see above-trend growth” for the U.S. economy, he said.