Consumer spending is expected to accelerate this year, while government spending declines at a faster rate, according to the results of a late-April survey of 49 business economists.
The economists predict that the economy will grow 2.4% this year and 3% next year, which holds steady with their forecast in February. They are more bullish on consumer spending and housing than three months ago, partly because of a more positive view about unemployment.
They predict that consumer spending will rise 2.3% this year, up from a forecast of 1.9% in February. They also were more upbeat about auto sales, predicting 15.4 million vehicles sales, a jump of 1 million over 2012.
The survey was released Monday by the National Association for Business Economics, which regularly surveys economists for banks, manufacturers and universities.
While consumers might spend more, the government sector is expected to shrink 2.3% this year — sharper than the 1% cut economists predicted in February, before a series of automatic federal spending cuts kicked in when Congress and the White House failed to reach a deal to avoid them. The economists expect government spending to decline a more modest 0.9% in 2014, but Hensel said the forecast could change to a steeper decline if it looks like the automatic cuts will continue into the next fiscal year.
The economists predicted that home prices will rise 4.4% this year and 4% next year. Boosted by new construction, they predict a 15% jump in residential housing investment this year. Housing starts hit a 5-year peak in March then fell in April, with most of the decline because of less apartment construction.
Applications for building permits hit a 5-year high in April, suggesting the housing market will continue to recover. A recent survey by the National Association of Home Builders found continued optimism among builders.
The NABE economists, who were surveyed before April unemployment was reported at 7.5%, predicted that the rate will decline to 7.4% in the fourth quarter and 6.8% in late 2014.
The survey found little cause for concern about potential inflation. The economists forecast the Consumer Price Index will rise 1.9% this year and 2.1% in 2014.
The Conference Board last week reported that its index of leading economic indicators rose in April after dipping in March. A board economist said the economy was getting a lift from steady job gains and the housing market, offsetting government spending cuts.