Bank economists expect ‘breakout year’ of growth

Arizona Republic 01/17/2014, Page B06

By Russ Wiles

A panel of 13 bank economists predict 2014 will be a “breakout year” with slightly higher growth as private-sector demand accelerates and Washington’s fiscal drag eases.

The American Bankers Association committee forecasts the nation’s gross domestic product will expand 3 percent above inflation in 2014, which would exceed the post-recession annual high of 2.8 percent in 2010. By the fourth quarter, growth will be around 3.1 percent, they say.

“This will be the strongest economic growth since the expansion began in 2009, and the committee’s strongest forecast since 2005,” said Christopher Low, chairman of the Economic Advisory Committee and chief economist at FTN Financial, in a statement. “We expect faster growth in business investment and stronger job creation as the economy improves.”

Slightly rising interest rates will help savers but work against borrowers. Conventional 30-year mortgages are expected to carry average interest rates of 5 percent by the end of the year, up from 4.5 percent in late 2013. Yields on 10-year Treasury notes will climb to 3.4percent from around 2.9 percent over the year.

Economists predict the housing market will continue to grow and wages will increase as the unemployment rate falls to a projected 6.4 percent by the end of the year. The committee forecasts that home prices nationwide will rise solidly, with the strengthened housing sector supporting consumer spending on appliances, furniture, electronic equipment and building materials.

Consumers find themselves on a stronger financial footing and have regained confidence.

That also should support automobile sales, economists say.

“Household balance sheets are healthier than they have been in years,” Low said. “The consumer is the key; if people loosen up their wallets and pocketbooks, economic growth will be even stronger.”

The committee also sees business spending and exports gaining in 2014, and it forecasts a federal deficit of $560 billion in fiscal 2014, down from $680 billion in 2013, thanks in part to higher tax receipts.

Job growth is expected to grow from below 180,000 payroll positions a month in 2013 to above 200,000 monthly in 2014, helping to push the unemployment rate down to 6.4 percent by the fourth quarter.

The American Bankers Association previously reported that consumer-loan delinquencies have dropped sharply, and that trend is expected to continue, while lending to consumers and business will rise moderately. Consumer-loan delinquencies are expected to average 2.2 percent both years.

Reach the reporter at or 602-4448616.

This entry was posted in Economy, Public Policy. Bookmark the permalink.

Comments are closed.