Business forecasters boost 2-year outlook for U.S. economy

JOBS

The National Association for Business Economics forecasts more hiring. On average, it expects the economy to add 251,000 jobs per month in 2015 and then 216,000 per month in 2016.

CONSUMER SPENDING

NABE predicts consumer spending will increase by 3.3 percent in 2015 and to increase by 3 percent the following year. Also on Monday, the Commerce Department reporteed consumer spending edged up a tiny 0.1 percent following declines in January and December.

PENDING HOME SALES

The National Association of Realtors said Monday that its seasonally adjusted pending home sales index climbed 3.1 percent to 106.9 last month, the highest reading since June 2013. Buying activity jumped in the Midwest and West, while dipping slightly in the Northeast and South.

A business economics group has boosted its outlook for U.S. economic improvement this year and next, particularly for job growth.

The March report from the National Association for Business Economics forecasts more hiring, a lower unemployment rate, a lower inflation rate and more growth in consumer spending in 2015, compared to the group’s forecast December 2014.

The report, released early Monday, also predicts more investment by businesses in both equipment and intellectual property, as well as modest growth in stock prices.

“Healthier consumer spending, housing investment and government spending growth are expected to make outsized contributions to the projected acceleration in overall economic activity. Accordingly, recent labor market strength is expected to continue,” John Silvia, the association’s president and the chief economist at Wells Fargo, said in a statement.

Other factors driving the improved forecast include an increased pace of activity in the housing sector, the strong dollar and continued low oil prices.

The report predicts the benchmark price for crude oil, which fell from $98 per barrel in December 2013 to $59 in December 2014, will average $61 per barrel at the end of the year and $69 per barrel in December 2016. Just three months ago, the group forecast that oil would spike to $85 per barrel by December 2015.

Bolstering the NABE’s outlook Monday were reports on consumer spending and pending home sales. Consumer spending edged up a tiny 0.1 percent following declines of 0.2 percent in both January and December, the Commerce Department reported. The result reflected a 0.4 percent increase in nondurable goods such as food and energy coupled with a 0.1 percent fall in durable goods such as automobiles. And the National Association of Realtors said that its seasonally adjusted pending home sales index climbed 3.1 percent to 106.9 last month, the highest reading since June 2013.

The NABE report did contain some negatives, however. Those include a widening U.S. trade deficit in 2015, a 0.1 percent dip in 2015 hourly compensation growth from December’s prediction to 2.5 percent, and scaled-back forecasts for 2015 corporate profit growth, down 2 percentage points to 4.7 percent from December’s forecast.

Meanwhile, 88 percent of the panel of 50 professional forecasters predicted the Federal Reserve will start increasing interest rates in the second or third quarter of this year.

Highlights of the association’s forecast include:

• On average, the economy should add 251,000 jobs per month in 2015 and then 216,000 per month in 2016.
• The U.S. unemployment rate — now 5.5 percent, the lowest in seven years — is expected to dip to 5.4 percent in December and then decline to 5.1 percent in 2016.
• Gross domestic product is expected to grow 3.1 percent in 2015, unchanged from the December forecast.
• The federal deficit is expected to total $460 billion in fiscal 2015 and $453 billion in the 2016 fiscal year.
• The group's forecast for Standard & Poor's 500 index, on average, is to end 2015 at 2,150 and end 2016 at 2,262.
• Inflation, as measured by the consumer price index, is expected to decline 0.6 percent in 2015, a big improvement over December's forecast that it would increase by 1.7 percent.
• Consumer spending is forecast to increase by 3.3 percent in 2015 and to increase by 3 percent the following year.