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Economists predicting moderate growth in 2013

Published on NewsOK Modified: February 25, 2013 at 5:00 am •  Published: February 25, 2013

Congress and President Barack Obama averted the so-called fiscal cliff at the end of December with a deal that allowed tax rates to rise on individuals making more than $400,000 and families making more than $450,000 per year. That deal also allowed the temporary 2 percentage point cut in Social Security payroll taxes, which was in effect for two years, to expire.

The tax increases in the fiscal-cliff deal, especially the rise in Social Security payroll taxes, will mean slower growth this year. It will mean that a worker earning $50,000 annually will see his Social Security tax go up by $1,000.

That will slow consumer spending, which accounts for 70 percent of economic activity. The NABE panel forecast consumer spending will rise at an annual rate of 1.9 percent this year but will accelerate in 2014 to a growth rate of 2.5 percent.

The NABE panelists were also pessimistic about Europe's on-going budget troubles, which have hurt the U.S. economy by cutting into export sales. Over one-third of the panelists said they believe Spain will need a larger bailout package this year and one-fourth think that on-going debt troubles in Italy will force that country to take bailout support as well.

"The problems in Europe and our own domestic fiscal drama will keep the investment outlook subdued," said Kenneth Simonson, chief economist for the Associated General Contractors of America and a member of the NABE panel.

Among other predictions in the latest NABE survey:

—Unemployment, currently at 7.9 percent, will decline slowly to 7.5 percent by the end of this year and to 7 percent by the end of 2014, with average monthly job growth of 170,000 this year and 193,000 in 2014.

—Inflation will remain modest at around 2 percent, giving the Federal Reserve leeway to keep a key short-term interest rate at a record low near zero this year and in 2014.

—New home construction, which is finally rebounding after the housing bust, will jump 25.6 percent this year and another 17.3 percent in 2014, pushing construction next year to 1.15 million homes.