The consensus of the 48 economists surveyed by the National Association for Business Economics is that bad weather cut first-quarter growth to a weak annual rate of 1.9 percent, but that growth could exceed 3 percent by year's end. NABE's report, released Monday, covered a survey period from Feb. 19 through March 5.
Their forecast for average U.S. economic growth of 2.8 percent this year is better than the 2.5 percent rate they predicted in NABE's December survey. Those surveyed expect consumer spending to now increase 2.6 percent in 2014, not 2.4 percent, as hourly wage growth is forecast to rise faster than inflation. GDP is expected to grow an average 3.1 percent in 2015.
"Conditions in a variety of areas -- including labor, consumer and housing markets -- are expected to improve over the next two years, while inflation remains tame," NABE President Jack Kleinhenz, chief economist of the National Retail Federation, said in a statement.
Given the stronger growth forecast, 57 percent of the economists surveyed believe the Federal Reserve will end its bond purchases in the fourth quarter, as the central bank has signaled it plans to do. Another quarter think it will happen even before that, though 17 percent think the Fed will keep buying bonds into 2015.
The Fed has been buying bonds for the past several years with the aim of driving down long-term interest rates to stimulate spending and economic growth. Now that the economy is slowly but steadily improving, it has been tapering those purchases.
One-third of respondents said the Fed could even raise short-term interest rates this year, though more than half think it won't happen until next year. Fed Chair Janet Yellen said Wednesday that with the job market still weak, the central bank intends to keep short-term rates near zero for a "considerable" time and would raise them only gradually. She also said the Fed wouldn't be dictated solely by the unemployment rate, which Yellen feels overstates the health of the job market and the economy.
Yellen appeared to jolt investors last week when she tried to clarify the Fed's timetable for raising the short-term rate. She suggested that the Fed could start six months after it halts its monthly bond purchases. That would mean the rate could rise by mid-2015. A short-term rate increase would elevate borrowing costs and could hurt stock prices. Stocks fell after Yellen's mention of six months. The Dow Jones industrial average ended that day down more than 100 points.