Economists expect US to shake off winter slowdown
John W. Schoen | @johnwschoen
Monday, 21 Apr 2014 | 5:31 AM ET
This winter’s brutal weather took a toll on sales growth for U.S. businesses, according to a survey of economists released Monday. But the group expects business to pick up again now that the worst of the harsh weather is over.
A majority of companies responding to the latest quarterly survey by the National Association for Business Economics said sales are growing, but that growth was less widespread than a similar survey three months ago. The number of firms reporting higher profit margins also fell slightly.
“Buffeted by a very rough winter, sales grew at fewer firms during the first quarter,” said NABE President Jack Kleinhenz, Chief Economist at the National Retail Federation. But the group has “strong expectations for increased growth over the course of 2014,” he said
A series of relentless winter storms dampened consumers spending and lowered factory output, slowing the overall economy. But recent data have pointed to a rebound. Retail sales and industrial production were strong in March, and employment seems to have picked up again after a weak pace of hiring in December.
Forecasters expect the harsh winter slowed the growth of gross domestic product in the first quarter from a 2.6 percent growth rate in the last three months of 2013. But the economy is expected to snap back in the second quarter of this year as the impact of the harsh winter fades. Some forecasters see second-quarter GDP growth running as high as 3.6 percent on an annual basis..
Among the NABE panelists, some 80 percent expect real GDP growth to be above 2 percent this year, with 72 percent expecting growth to be in the 2 percent to 3 percent range. None of the respondents expected growth to top four percent and none expect the economy to contract this year.
During the first quarter, more companies also reported that profits were pressured by rising materials and wage costs, according to the NABE survey. Fewer companies expect to raise prices than they did three months ago.
A little more than a quarter added employees in the last three months, but more than 40 percent expect their companies to add workers in the next six months, up from the January survey. About a quarter reported shortages of skilled labor.
The economists expect wage growth to remain fairly slow, rising less than 3 percent over the next three years. They also expect unemployment rates to fall to between 5 percent and 6 percent over the same period.
Some 80 percent of the group also expects the Federal Reserve to stick with its plans to end its bond-buying program, known as quantitative easing, by the end of this year.
Federal Reserve Chair Janet Yellen said on Wednesday the economy was making “very meaningful progress,” adding it was “quite plausible” it would be back to near full employment by the end of 2016.