WHAT TO EXPECT IN 2013

THE 2013 ECONOMY AT A GLANCE

According to a survey conducted by Reuters, the U.S. Economy will stay on a moderate growth path in the year 2013 amongst lackluster consumer spending and weak business investment. A forecast by the National Association for Business Economics projects that GDP will grow at an average annual rate of 2.1% in 2013. A similar survey conducted in October yielded very similar results, predicting a 2.2% GDP growth for 2013. As seen, little has changed between todays analyst forecasts and 2012 forecasts. "The panelists forecast little improvement in consumption growth, significantly reduced growth in investments in nonresidential structures, equipment, and software, and reduced growth in corporate profits and industrial production," said Nayantara Hensel, chairperson of the NABE Outlook Survey.

The same survey by Reuters that determined United States growth in 2013 also forecasts the budget deficit shrinking to $900 billion in 2013 from an estimated $1.09 trillion this year. However, a shrinking deficit should not be equated to a shrink in government stimulants to the US economy. The 2013 budget includes new proposals to promote growth and employment.

In December 155,000 jobs were added by U.S. employers. This steady gain withstood the tense fiscal cliff negotiations in Washington. Of the 155,000 added jobs, 30,000 jobs were gained by the construction industry, and manufacturers gained 25,000 jobs. Unfortunately, this is slightly inflated due to an increase in construction for repairs and rebuilding following Hurricane Sandy. However, thinking positively, as employers continue to hire despite turmoil in congress we will hopefully see this trend continue as the turmoil and unrest continues to plague congress in the upcoming months concerning future budget disputes. Layoffs are declining, and the number of people seeking unemployment aid in the past months is at a 4 year low.

Unfortunately, there is a concern that lawmakers will fail to prevent a raft of government spending cuts and tax increases from kicking in early in 2013, and drain about $600 billion from the economy. In addition, the headwinds from the European debt crisis has hit the US economy and will continue to damage the United States economy as the debt crisis in Europe is predicted to worsen this year.

Katherine Anne Doerr, Associate Analyst for Economic Analysis 27 January 2013 Sources: Bloomberg, NY Times, the Economist, Reuters, MSNBC

A rise in US Consumer Confidence (CC) will directly follow a decline in jobless claims. In December the CC fell from 71.50 in November 2012 to 65.1. Currently, the index stands at 65.1. Furthermore, the Expectations Index declined sharply to 66.5 from 80.9, and is continuing to stand at 66.5. These declines represent the meager 17.6 percent of consumers expecting business conditions to improve over the next 6 months down 4%. Unfortunately, revised percentages have yet to be revised since the jobs report released on January 24. Hopefully, Because the decrease in job claims, as reported by by Januarys Job Report, will cause hopefully see the CC ad EI to rise in accordance. As the bar graph to the right illustrates, consumer spending in the year ahead beat out concerns about taxes and health care costs. The passage of the Taxpayer Relief Act on Jan. 1, which was generally wellreceived by the industry, might have alleviated some concerns about taxes tax incentives for business investment were preserved, and the estate tax was increased to only 40% but might have exacerbated concerns about consumer spending. As part of the act, the payroll tax holiday ended, meaning an extra 2% of workers pay will be docked this year. Growth in Consumer spending is seen averaging 2% in 2013. This forecasted percent is less then the 2.5% growth in 2011, and slightly higher than the 1.9% growth seen in 2012.

According to Chart 2-6 the United States Real GDP Growth is forecasted at 3.2%. This is slightly below the average 4.1% growth in Real GDP following a recession. However, the missing 1.1% should not be seen as a negative, but looked at with a positive eye because all else equal the economy is recovering, and with that we will see growth.