Although economists have trimmed their estimates for second-quarter U.S. gross domestic product (GDP) growth, they don’t believe the economy will hit a recession this year or next.
The National Association for Business Economics’ Outlook survey of 50 economist, taken just days after the release of the June jobs report, also found economists believe the Federal Reserve will hike rates earlier than previously expected.
The panelists’ median forecast for annual second-quarter 2014 real GDP growth is 3 percent, down from the 3.5 percent median forecast when the full Outlook survey was last released in June.
But in a positive sign, economists said the probability of the U.S. economy entering a recession in 2014 or 2015 is extremely low, with 60 percent of panelist saying the odds were less than 10 percent.
“Notwithstanding the difficult start to the year, opinion is widespread that the economy is on solid footing,” said Timothy Gill, Outlook survey chair.
The minutes from the Fed’s latest policy meeting did not indicate did not indicate that the central bank intends raise interest rates ahead of schedule. But with unemployment and inflation getting closer to the Fed’s target levels,analyst are predicting that rate hikes could come sooner rather than later.
More than half of those surveyed forecast the Fed will next increase its federal funds rate target in the first half of 2015, with a plurality of almost 37 percent expecting a hike during the second quarter of next year.
Another 36 percent said they expect an initial rate hike in the second half of next year.
The results are nearly reversed from the June survey, when 33 percent expected a rate increase in the first half of 2015 and 53 percent expected a hike in the second half.
In addition, the survey showed economists expect second-quarter real personal consumption expenditures to increase 2.3 percent, down from from 2.9 percent growth pace expected in June.
Real exports are expected to rise 2.5 percent on an average annual basis in 2014, less than half of the 5.5 percent growth pace predicted in NABE’s March survey.