Business economists cut their U.S. growth outlook for next year to 2.4 percent as companies and consumers restrain spending, a survey released today showed.
The growth estimate was lowered from 2.8 percent forecast in May, the survey by the Washington-based National Association for Business Economics showed. The prediction for this year was reduced to 1.9 percent from 2.4 percent.
Economists responding to the survey “expect economic growth to be tepid overall in 2012 and 2013, but predict growth to slowly accelerate through 2013,” Shawn DuBravac, chief economist at the Consumer Electronics Association in Arlington, Virginia, who analyzed the results, said in a statement.
The world’s largest economy is likely to skirt the worst damage from the so-called fiscal cliff, the more than $600 billion of federal spending cuts and tax increases that will automatically take effect at the start of next year unless Congress acts, the survey showed.
While business leaders don’t see that scenario playing out, the risk that it may is a reason they are bracing for slower growth, said Ken Simonson, NABE president-elect for 2012-2013 and chief economist at the Associated General Contractors of America, a trade group based in Arlington, Virginia.
“I’ve heard repeatedly from business executives saying this uncertainty is causing us to hold back on investment,” Simonson told reporters today at NABE’s annual meeting in New York. “There’s certainly worry, and just having a small chance of a major disaster does cause people to be more cautious in their investment and hiring.”
Executives also have cited threats to growth from China’s cooling economy and Europe’s debt crisis, which both are “hurting export prospects,” Simonson told reporters.
Consumer spending will be restrained by weak income gains and job growth, while the economy gets a boost from rising home prices and construction, the survey showed.
Respondents cut their forecast for consumer spending growth to 1.9 percent this year and 2 percent next year, it showed. The unemployment rate forecast for the fourth quarter of 2012 was raised to 8.1 percent from 8 percent.
The survey of 44 professional forecasters was conducted Sept. 14-26, before an Oct. 5 Labor Department report showed the jobless rate unexpectedly fell to 7.8 percent from 8.1 percent.
After-tax corporate profits are seen rising 7 percent this year, up from a 5 percent gain predicted in May, according to the NABE survey. The Standard & Poor’s 500 Index is expected to climb to 1,450 at the end of 2012 and to 1,520 in 2013.
The benchmark index for American equities advanced 0.5 percent to 1,435.67 as of 2:40 p.m. in New York after a government report showed retail sales rose more than forecast in September.
The economy expanded at a 1.3 percent pace from April through June after growing at a 2 percent rate in the first quarter. The median forecasts in a Bloomberg survey of 91 economists taken Oct. 5-10 predict annualized gross domestic product growth will average 2.1 percent this year and 2 percent next year.
The NABE survey forecasts average monthly growth in non-farm payrolls of about 155,000 next year, down from a forecast of 200,000 in May. The unemployment rate is seen ending next year at 7.8 percent.
Investment in non-residential equipment and software is forecast to increase 6 percent next year, down from a gain of 7.5 percent in 2012.
Housing starts will increase 13 percent to a total of 850,000 in 2013, the economists forecast. NABE, founded in 1959, has 2,400 members.