The U.S. economy is in the midst of an expansion that may last another three to five years,
“We think the U.S. economy has entered a self-sustaining expansion, and no longer needs the crisis-related monetary stimulus we have had,” Lazar said. “We believe the Fed also sees a solid expansion, and we expect the Fed to continue to taper. U.S. domestic growth is likely to be driven by the private sector, and we’ve raised our forecast for real GDP growth in 2014 from 3% to 3.5%. Growth in capital spending, which slowed in 2013, is likely to accelerate in 2014, and consumer spending is also likely to accelerate from 2.5% year over year in 4Q of 2013 to 3% in 2014.”
“The housing, energy and manufacturing sectors are all doing well,” said Lazar, who has been an Institutional Investor-ranked economist for the past 12 years, and ranked #2 for the past four years.
“Housing is experiencing a recovery that could continue for three to five years, fortified by pent-up demand,” she said. “Housing growth may be a little slower this year, primarily due to the increase in mortgage rates and sharply higher house prices relative to income, and also because lending standards may get a little tighter given all of the rules and regulations coming out of
“The U.S. is probably the leader in global economic growth, and we’re seeing a decoupling between U.S. economic activity and emerging economies, such as
Small businesses, which account for about half of private GDP and employ more than half of the private workforce, are not doing well, said Dr.
“I focus my analysis of the economy by looking at small business, which the SBA defines as companies with fewer than 500 employees – that’s 99% of all employer firms,” Dunkelberg said. “In the recovery, we have seen a bifurcated economy. Big firms are doing well, mostly because they can export and make money overseas, and the stock market reflects that success. By contrast, small firms are doing very poorly. This produces an average growth of 2%.
“Small business owners remain pessimistic about the future, with more expecting the economy to deteriorate over the next six months than those who think business conditions will improve. The NFIB Small Business Optimism Index is still in the doldrums, at 93.9 in December, well below the pre-recession average of 100 and atypical of recoveries in the past, where the Index is well above 100.”
Dunkelberg expects sub-par economic growth, with much of the blame going to
“A huge source of uncertainty emanates from Washington,” he said. “Two-thirds of small business owners say this is a bad time to expand, and 30% of them blame the political climate. Only 10% think this is a good time to expand, well below average. Obamacare is a big part of that. Taxes and regulations and red tape are top concerns, and the President keeps promoting higher taxes. Regulations are hitting the Congressional Record at a record pace, and the President is running the economy by fiat.
“Consumers are not happy and if they don't spend, businesses don't hire or order new inventory. Only 1 in 10 in the
Perhaps surprisingly, the environment in
“One of the big surprises I expect later this year is a sharply revised estimate on the budget deficit,” Valliere said. “The deficit is coming down dramatically, and while that is not widely appreciated in
The economy continues to benefit from both monetary and fiscal policies, Valliere noted.
“We have a very accommodative Fed, along with fiscal restraint, which will persist as long as Republicans control the House,” he said. “As far as the elections, Republicans are in some disarray. The Democrats are more united, but the stars are not aligned for them to do well in the fall. The House will stay Republican, partly because of the way the districts are drawn, but also because of public antipathy towards Obamacare. In the
“So, the election will result in
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