Survey: Economists more pessimistic on growth this year

NEW YORK, N.Y. – Business economists are more pessimistic, predicting weaker growth in corporate profit and the economy than they were late last year, a survey found.

The median estimate from economists surveyed by the National Association for Business Economics said business profits would rise 2 per cent in 2016, down from the 5 per cent growth forecast in December.

The survey also found that most economists have lowered their outlooks for economic growth in 2016, and now expect that the U.S. will grow 2.2 per cent this year, on average. That’s down from a December prediction of 2.6 per cent growth. The survey also found that 79 per cent of economists lowered their growth outlook for 2017.

While lower gas prices are giving U.S. households some more cash for consumer spending that could power economic growth, Americans have been cautious. The Federal Reserve has predicted that a typical U.S. household will have about $1,000 more to spend this year because of lower gas prices. But so far much of that has been saved or used to pay down debt. About half the NABE economists said that Americans would keep saving the largest part of this windfall in 2016, while 62 per cent said they would use much of it to pay down debt. The economists could choose more than one option.

But the economists are also optimistic about this cash going to some parts of the economy. About 66 per cent see splurging at restaurants and on other services, while 60 per cent predict spending on cars, home appliances and other long-lasting products.

Sixty-seven per cent of the economists surveyed expect that the Federal Reserve will raise interest rates two times this year. The Fed raised its benchmark interest rate from record lows in December and signalled that more hikes would be coming this year. They have scaled back the number expected from four to two as the global economy and financial-market turmoil still pose risks.

The survey of 48 forecasters was from Feb. 24 to March 10.