Election angst will see US economy expand this year by least since 2012: Economists

A man walks past the Federal Reserve in Washington, DC.
A man walks past the Federal Reserve in Washington, DC.PHOTO: REUTERS

WASHINGTON (BLOOMBERG) - Economic growth will slacken in 2016 to its slowest pace in four years as uncertainty about the presidential election weighs on the outlook, according to a survey of forecasters by the National Association for Business Economics.

They see gross domestic product expanding 1.9 per cent this year on a fourth quarter-to- fourth quarter basis. That's down from a projected 2.5 per cent gain in the last quarterly survey released in March and compares with growth last year of 2 per cent.

Almost 60 per cent of forecasters say uncertainty surrounding the November presidential election will hurt the economy, the association said.

"If I'm an owner of a medium-sized business and I'm hearing very rattling news about the election, on the margin I'll be a little more cautious about hiring or making an investment," said Lisa Emsbo-Mattingly, president of NABE.

Ms Emsbo-Mattingly, who is also director of research for asset allocation for Fidelity Investments in Boston, said the biggest factor behind the markdown in the 2016 outlook is weak business investment. Spending on equipment, structures and intellectual property is projected to stall in 2016, after expanding 2.8 per cent last year.

Corporate profits are forecast to fall this year for the first time since 2011, when they declined 2.9 per cent, according to the survey. The NABE panel sees a 2 per cent drop in after-tax profits without inventory valuation and capital consumption adjustments after a 3.3 percent advance last year.

The survey of 48 economists was conducted from May 2 to May 17, before last week's release of the monthly jobs report that saw payrolls rise at their slowest pace in almost six years.

The NABE panel projects the economy will gain ground in 2017, with GDP climbing 2.3 percent, according to the median forecast. Profits are also projected to recover and rise by 3.9 percent next year.