Some of the nation's top economists say this year should bring the strongest growth for the U.S. since the financial crisis. That could translate to a modest increase in interest rates for consumers.
In a news conference held this morning by the American Bankers Association, its advisory committee said growth should average 3 percent this year in the U.S. "We see 2014 as something of a break-out year," said Christopher Low, chief economist for FTN Financial. "We had to go back to the files to find the last time we had a 3 percent growth forecast." As it turns out, it was in 2005.
The group says modest improvement should take place in most areas of the economy, anchored in housing.
Faster job growth should also be part of the equation. While employers added an average of more than 180,000 jobs a month in 2013, the bank economists look for that number to rise to 214,000 by the end of 2014. They also see the unemployment rate slipping to 6.4 in the final quarter of this year.
Low said the economy could actually be even stronger than the group expects.
One helpful change to the growth environment includes a slight increase in government spending this year, with a federal budget expected to be in place. Low noted the comparison to the decline in government spending seen in recent years, including at the state and local level. Business investments are also picking up.
Overall, the group's chief economic worries are focused overseas with the global economy, including the fragile recovery in Europe and the tightening of credit in China.
For interest rate watchers, the panel expects a slight increase in the yields of U.S. Treasury notes and bonds through the end of this year. It also expects the average for 30-year fixed mortgage rates to hit 5 percent in the final quarter of this year, up about half of 1 percent from where they have been recently. As the economy improves, credit should become more available to business and consumers over the next six months.
Do you share the economists' optimism? What would you do differently if the economy were to improve this year?
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