Underlying Economy Improving, Uncertainty Diminishing: NABE Survey
This morning the National Association for Business Economics released its latest survey, covering the outlook for 2012 and 2013. The survey was conducted between January 26-February 8, 2012.
NABE Survey Chair, Shawn DuBravac, chief economist at the Consumer Electronics Association, talked to C-Suite about the results.
LL: Based on the latest NABE Outlook Survey, what are the highlights?
SD: You are seeing a diminished level of uncertainty. If you compare the results of the consensus forecast in November to this survey — the expectations for 2012 GDP growth of 2.4 percent did not change. Those surveyed said they have seen many of the underlying measures improving. We have stronger housing starts predicted for 2012, which is a positive sign. Housing starts typically is a catalyst coming out of a recession.
Also, while it has come down a little bit since November, expectations on housing prices has gone up. We currently predict housing prices will be flat, zero for 2012 and 2.1 percent growth for 2013.
We are moving from an environment of individuals being hesitant in catching the falling knife to having a greater appetite in buying homes. Cap Ex continues to grow and that's been a positive story for a while now. There is a degree of confidence and optimism in the business community. Businesses can be only so efficient and lean.
Now, we are getting some signs companies are now looking to hire.
Unemployment will continue to be high in 2012 at 8.3 percent for this year, but we are seeing things to improve there.
LL: Are economists optimistic or cautiously optimistic about US economic growth?
SD: Economists are cautiously optimistic. Where the caution comes in is projected for export growth. While positive, 20 of US exports depends on Europe. A slowdown in Europe translates into a slowdown in US exports. Consumer spending is still below trend. They are still working through the process of de-levering to get to a more sustainable financial position.
The optimism comes in with forecasters feeling more comfortable with their estimates. The fact they have not altered their GDP outlook is a pretty positive story. If you recall where we were a year ago, we were moving to an area that things were getting worse and there was greater uncertainty.
We were having significant discussions around the chances of a second recession. That is not what we are seeing or saying today. Better growth is ahead of us.
LL: What kind of uncertainties specifically have diminished?
SD: There is less concern on the timing of recovery in housing prices and GDP growth is stable. Monetary policy is now more certain than it was a couple of months ago.
LL: What's their outlook on the deficits? With the polarization in Washington, are they confident we'll see in the near term some meaningful deficit reduction plan agreed and acted on?
SD: They see things in the near term getting worse but than it gets better over the long-term. They see a trillion dollar deficit in 2012 and that is up a bit from their estimate in November. Looking out to 2013, they do see that improving a bit of a deficit of $876 billion.
LL: Do they see any strength returning to consumer spending?
SD: One area we see improvement are the sales of automobiles. It is growing at a pace of 14 million going to 14.6 million in 2013. There is pent up demand for durable goods like vehicles and other durable goods.
LL: What do economists want to see so the US Economy can break out of 2.4 percent?
SD: For 2013, we see GDP at 2.8 percent. You'll see consumer spending coming in stronger, residential investment improving and the growth rate. If we had a more robust spending now as well as residential investing and stronger exports, you could break out of the 2.4 percent this year.
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A Senior Talent Producer at CNBC, and author of "Thriving in the New Economy:Lessons from Today's Top Business Minds."