USA Today Survey: Economy Headed for Fast Track this Year

Wednesday, 13 Feb 2013 10:50 AM

By Michelle Smith

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Most economists expect the U.S. economy will get on a strong growth track this summer, according to a new USA Today survey.

The survey of 46 economists reveals 37 percent have higher expectations than they did in October. Though most participants recognize the U.S. economy is likely to be sluggish for the first six months or so, they are essentially projecting 2013 to be a year of two halves.

During the closing quarter of 2012, the economy shrank at an annualized rate of 0.1 percent, the first contraction since the recession ended. The causes for the contraction included weak exports, slow inventory growth by companies and cuts to defense spending.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

This year began with government spending cuts expected to be a further weight on growth.

The Congressional Budget Office, which projects real gross domestic product growth of only 1.4 percent this year, says that the slow growth reflects a combination of ongoing improvement in underlying economic factors and fiscal tightening that has already begun or is scheduled to occur. That includes the payroll tax hike that went into effect in January, an increase in tax rates at certain income levels and scheduled automatic federal spending cuts.

The economists surveyed by USA Today tend to agree that these factors will act as headwinds for the economy in the first half of the year. But, they project a turnaround this summer and foresee the United States getting on a track that will lead to nine months of growth at the fastest pace seen in three years.

With an improvement in business activity, the negative impact of federal spending cuts is expected to evaporate by the fourth quarter.

The pace of job creation is also set to quicken, the economists say, from an average of 157,000 jobs per month added in first quarter to 184,000 per month in the fourth quarter.

By the end of the year most of the survey participants expect unemployment to fall from the current rate of 7.9 percent to 7.5 percent.

Though a bit ahead of schedule, this projection is similar to that of the CBO, which foresees a 7.5 percent unemployment rate in 2014 along with an increase in the rate of economic growth.

“I think we're really on the verge of this becoming a self-sustaining recovery,” Richard Moody, chief economist at Regions Bank, tells USA Today.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

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