Thursday, January 16, 2014

Bank Economists See Stronger Economic Growth in 2014

According to the committee, which includes 13 chief economists from among the largest banks in North America, inflation-adjusted GDP growth for 2014 will be 3.0 percent, compared to a 2.3 percent annual average since the Great Recession ended in mid-2009 and the post-recession high of 2.8 percent in 2010.

"This will be the strongest economic growth since the expansion began in 2009, and the committee’s strongest forecast since 2005,” Christopher Low, chairman of the group and chief economist of First Horizon National Corp's FTN Financial, said. "We expect faster growth in business investment and stronger job creation as the economy improves."

The bank economists believe the housing market will continue to grow in 2014 as wages increase and the unemployment rate continues to fall. The group sees the housing sector gaining strength as home sales recover from depressed levels. The committee forecast is that home prices nationwide will rise solidly and residential investment will increase 12.3 percent in 2014. The strengthened housing sector will support consumer spending.

"When families get into new homes, they spend more on appliances, furniture, electronics and building materials," Low said.

Consumers are also finding themselves on stronger financial footing in the New Year and have regained confidence. The group believes consumer spending will support economic growth over the year ahead. Automobile sales are also expected to remain strong.

"Some consumers remain cautious due to lingering high unemployment and slow wage growth," Low said. "Many have not benefited from the resurgent stock market and personal income growth, and are carefully watching what they spend. But tax rates will rise much less in 2014, and household balance sheets are healthier than they have been in years. The consumer is the key; if people loosen up their wallets and pocketbooks, economic growth will be even stronger."

As the recovery improves, the group believes underlying drivers of economic growth will broaden beyond housing and consumption. Business spending and exports should also be stronger in 2014. The committee believes the fiscal environment will be friendlier in 2014 and will exert less drag on consumers and businesses over the course of next year.

After slowing in December, job growth will accelerate from near 180,000 per month last year to over 200,000 monthly in 2014, according to the bank economists.

In 2014 and 2015, loans to individuals are expected about 7 percent and loans to businesses will grow 8 percent.

"Banks will continue to meet the needs of their customers as we work to make the loans that help drive our economy forward," Low said.

Read the full release. Read the detailed EAC forecast numbers.

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