Economists slash Q3 GDP forecast, but see steady growth ahead

US growth check: Jobs & housing
US growth check: Jobs & housing

Although economists have lowered their estimates for third-quarter U.S. gross domestic product (GDP) growth following an extremely volatile first half of the year, they see the economy growing steadily, according to a survey released Monday.

The U.S economy will expand at an annualized rate of 3.0 percent in the July-August quarter of 2014, down modestly from the 3.1 percent pace forecast in June, the National Association for Business Economics said.

The U.S. Bureau of Economic Analysis will release its advance estimate of Q3 GDP on Oct. 30.

NABE's outlook survey of 46 economists was taken between Aug. 25 and Sept. 9—a few days after the release of August's weak jobs report.

A trader works on the floor of the New York Stock Exchange.
Adam Jeffery | CNBC

The survey comes just days after the Commerce Department upwardly revised second-quarter GDP growth to an annualized 4.6 percent, showing the economy's fastest rate of expansion since the fourth quarter of 2011.

Economists expect growth to come in at 3.1 percent in the fourth quarter of this year, slightly lower than the 3.2 percent forecast in NABE's June survey.

Read MoreUS economy expanded at fastest rate in nearly 3 years last quarter

The panelists' median forecast for real GDP growth from the fourth quarter of 2013 to the fourth quarter of 2014 is 2 percent, down from the 2.5 percent projection in June.

NABE noted the current forecast was much higher than the 1.6 percent projection reported in a abbreviated outlook survey conducted in early July on the heels of a first-quarter GDP revision.

"Respondents to NABE's September 2014 Outlook Survey expect the pace of economic growth to steady following an unusually high degree of volatility in the first half of the year," said John Silvia, NABE president-elect and chief economist at Wells Fargo.

"Panelists are more optimistic in their forecasts—for business-fixed investment, government outlays, and international trade activity—than they were in June," Silvia said.

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Quarterly growth throughout next year is expected to fall just short of 3 percent. In contrast, the June forecast saw annualized growth coming in slightly above 3 percent through the end of 2015.

Q2 GDP (revised) up 4.6%
Q2 GDP (revised) up 4.6%

The median forecast for overall GDP growth for 2015 slipped to 2.9 percent from 3.1 percent in June.

The Federal Reserve sees the economy growing between 2 percent and 2.2 percent in 2014 and between 2.6 percent and 3 percent next year.

Fed rate hikes

Turning to Capitol Hill, the majority of participants believe the Fed will begin to hike rates in the second or third quarters of next year, which was on par with previous expectations.

Read MoreFed's Fisher says rates may rise 'sooner rather than later'

About 43 percent of respondents see the next rate increase occurring in the second quarter of 2015, while 26 percent expect it in the third quarter. Thirteen percent of the panel forecast a first-quarter 2015 rate increase.

Most panelists see the federal funds rate level holding in the current zero to 0.25 percent range through early 2015 before climbing to 0.845 percent by the end of next year.

Labor market forecasts

According to the poll, Nonfarm payrolls are expected to post an average monthly gain of 228,000 in 2014, a slight boost from the 209,000 forecast in June.

The pace of job creation is expected fall to 211,000 per month in 2015.

The unemployment rate is expected to decline to an average of 6.1 percent in 2014 and to 5.7 percent in 2015, down slightly from the previous forecast in June.

The Fed, in comparison, expects the unemployment rate to average between 5.9 percent and 6 percent and between 5.4 percent and 5.6 percent in 2014 and 2015, respectively.

On the other hand, respondents are more optimistic about wage growth. Economists raised their estimates for compensation growth for 2014 to 2.8 percent, up from 2 percent in June. The average estimate for wage growth for 2015 edged up to 2.6 percent from 2.5 percent previously.

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Forecasts for business equipment and software expenditures in 2014 rose to 3.7 percent from 3.2 percent in the June. The forecast rate for 2015 is also higher at 4.2 percent.

Consumer spending and housing

Analysts lowered their estimates for consumer spending and residential investments for the current year, citing stifled wage growth and difficulty in accessing credit as primary factors.

Economists see personal consumption expenditures growing at 2.3 in 2014, down from 2.9 percent in the previous survey, with about 67 percent of panelists citing weak personal income growth as a primary cause. The panel sees personal spending coming in just below 3 percent in 2015.

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After jumping nearly 12 percent last year, housing construction growth is expected to slow to 2.7 percent in 2014, well below the 9.0 percent and 3.8 percent gains forecast in March and June, respectively.

About two-thirds of panelists cited the inability of potential homebuyers to qualify for mortgage loans as the primary factor causing the housing market to underperform. NABE expects housing growth to rebound to 9.2 percent in 2015.