The U.S. economy is on the right path, and the probability of recession in the U.S. is "almost zero," according to Dan Meckstroth, chief economist for the Manufacturers Alliance for Productivity and Innovation. In the fourth quarter of 2013, GDP grew 2.6 percent.
Consumer spending is driving that growth, but consumer spending remains constrained by income, according to Meckstroth in MAPI's latest economic forecast webinar. While employment gains have been relatively strong over the past year – employment levels grew 1.9 percent in 2013 – "it's just that that employment growth is not resulting in large income increases," Meckstroth says.
Meckstroth anticipates growth in the first quarter of 2014 will be less than 2 percent, solely because of a "large inventory swing" that occurred in the prior quarter.
Even with those challenges, businesses and consumers should expect a lot less uncertainty about the economy moving forward, he says, because of the two-year budget agreement reached by Congress. Even though there was no "great bargain," the agreement helped to bridge the decline that occurred with the sequester. This easing of uncertainty should "facilitate growth in business investment" this year, Meckstroth says.
Perhaps the brightest spot in MAPI’s latest forecast is the outlook for residential construction. While that segment has been muddling along for the last few years, pent-up demand remains. MAPI is forecasting 12.5 percent growth in residential investment in 2014 and 18.8 percent in 2015, which translates to a positive outlook for sectors dependent on residential construction.