Recently published research from Business Monitor International, "United States Business Forecast Report Q4 2013", is now available at Fast Market Research
Boston, MA -- (SBWIRE) -- 09/03/2013 -- Our core view on the US economy is that recovery is becoming increasingly entrenched. By 2014 many of the headwinds to growth, including government spending cuts, will be dissipating. Not only do we expect growth to accelerate in 2014, we believe the US economy could be on the verge of a multi-year period of stronger growth.
Following the 2012 elections, the status quo in Washington remains relatively intact, which means political deadlock will continue to be the order of the day. That said, we maintain our view that Congress and the White House will avoid a government shutdown this year and will raise the debt ceiling before the end of 2013.
On the monetary front, we expect the Federal Reserve to begin slowing the rate of its asset purchases in Q413, and stop purchasing further assets altogether in H114. We have also raised our forecast for the first Fed funds rate hike to 0.75% at the end of 2015, from a previous projection of 0.50%.
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Major Forecast Changes
We have revised down our 2013 US real GDP growth forecast from 2.1% to 1.8%, which is mostly attributable to base effects from poor data readings in Q412 and Q113. Our 2014 growth forecast of 2.7% represents a major bounce from 2013, and we believe that the risks to economic expansion remain predominantly to the upside.
We have revised our federal budget balance forecasts to reflect smaller deficits over the next few years, both in nominal terms and as a percentage of GDP. While the trajectories are similar, we now expect the budget deficit to average 3.0% from 2013-2018, down from an earlier forecast of deficits averaging 3.8% of GDP.
Key Risks To Outlook
Downside Risks To Growth Forecast: The biggest external risk is a collapse of the eurozone, which would hit the US via a financial sector shock and via trade channels. A major domestic policy error, especially with a view to the debt ceiling, could push the US into recession.
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