Economic Outlook Provides Few Bright Spots
The U.S. economy is still far from where it needs to be to see real GDP growth of over 4% and put people back to work, said U.S. Chamber Chief Economist Marty Regalia.
“We’re not making headway,” Regalia said during the Chamber’s quarterly economic briefing on February 8. “Yes, we’re doing better than four years ago, but we’re not doing anything to get it back to where it was before the recession.”
The economy expanded slightly in the fourth quarter, thanks to a drop in the U.S. trade deficit and a decline in wholesale inventories in December. All told, GDP likely expanded 0.3% in the fourth quarter, which is still at a very anemic pace compared to other recoveries, Regalia said.
The non-partisan Congressional Budget Office came out with its’ projections earlier in the week and forecast that GDP would grow 1.4% in 2013 and accelerate to 3.4% in 2014, and an average of 3.6% a year from 2015 through 2018.
Regalia disagreed with the CBO’s long-term projection. “I’m not optimistic we’ll see growth ... as the CBO believes. It’s a recovery that has meandered along, and it’s wallowing around about 2.3%.”
There are, however, a few bright spots in the economy, Regalia said – primarily housing and energy. After years of uncertainty and tighter lending, the housing industry is on an upswing, according to Frank Nothaft, vice president and chief economist at Freddie Mac. Homes sales in 2012 were up 9% over 2011, and housing starts were up over 25%. Nothaft predicts that both trends will continue in 2013, thanks to historically low interest rates and low home prices.
While crude prices are up due to increased worldwide demand, Americans are enjoying sustained affordable energy prices, said John Felmy, chief economist for the American Petroleum Institute. “Increased production of oil and natural gas due to shale is good news in terms of supply, energy costs and employment,” Felmy said.
However, the United States is not unlocking its full potential as long as it puts up roadblocks to more energy development, particularly proposals of a increased taxes on the oil and gas industry, the possibility of more industry regulations, and limiting access to resource-rich lands such as portions of Alaska and offshore, Felmy warned. “Getting access is the biggest hurdle. We need to move on the five year plan for offshore areas that’s been delayed and we need to look carefully at the lease restrictions that have been put in place.”