A group of business economists sounded an optimistic note about the state of the U.S. economy this year, with a majority predicting that growth will hit its fastest pace in close to four decades.
A survey released Monday by the National Association for Business Economics shows that its members expect the economy to grow by 6.5% this year – the sharpest increase since 1984. The outlook is far brighter the 4.8% GDP increase forecast by economists in NABE's March survey.
The economy has strengthened considerably in recent months as vaccination rates have increased, business restrictions have eased and more Americans venture out to shop, eat at restaurants and travel. Significant government aid has also bolstered the recovery: Congress approved about $4 trillion in spending under former President Donald Trump, and in March, President Biden in March signed into law another $1.9 trillion relief plan.
But the unprecedented amount of government spending has spurred concerns among some economists and GOP lawmakers that the U.S. is on track for runaway growth. The business economists largely dispelled that notion; they predicted the personal consumption expenditures price index, which excludes the more volatile measurements of food and energy, will fall to 2.1% in the fourth quarter from a projected 2.6% in the April-June period.
"Inflation expectations moved up significantly from those in the March survey, but panelists anticipate inflation easing in the second half of 2021, with no resurgence in 2022," Holly Wade, the chair of the survey, said in a statement.
The survey comes two weeks after the Labor Department reported that consumer prices in April saw the biggest increase in decades, spurring concerns of surging inflations as the Biden administration pushes forward with a $4 trillion tax and spending plan.
The Federal Reserve, led by Chairman Jerome Powell, has held interest rates near zero since March 2020 and has repeatedly indicated it will do so until "labor market conditions have reached levels consistent with the Committee's assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time."
Powell has stressed that he sees no signs of persistent inflation.
The NABE economists also anticipate that the U.S. will return to full employment by the end of this year or in 2022. The unemployment rate will likely average 5.6% this year before falling to 4.3% next year, they said.
The survey, conducted between May 7 and May 13, is based on a panel of 49 forecasters.