Economists See Stronger Economy and Concern Grows Over Spending

Business economists have grown much more optimistic about the U.S. economy’s growth prospects in 2021—and increasingly wary of the Biden administration’s big spending plans.

The median forecast is for 6.7 percent real growth rate in 2021, according to a survey from the National Association of Business Economists. That is a big step up from the 4.8 percent forecast in the March survey.

The economy has responded to the lifting of pandemic restrictions much stronger than most economists expected. In December, the NABE survey had the median real GDP growth estimate for 2021 at 3.4 percent, a downgrade from the 3.6 percent forecasted in the October survey.

That has called into question the need for the Biden administration’s stimulus spending plans, which were formulated under the assumption that the economy would be much weaker. The two other big Biden spending schemes, called the American Jobs Plan and the American Families Plan, also look less attractive now that the economy is on a firmer footing and inflationary pressures are rising.

“A plurality of panelists, 42 percent, regards large fiscal programs as the biggest upside risk to the economy,” NABE said. “These panelists’ concerns are evenly divided between an infrastructure spending program and a large fiscal stimulus program.
Infla6iton has accelerated beyond expectations but the NABE survey indicates economists expect it to slow down later this year.

“Respondents see the personal consumption expenditures price index, minus food and energy, cooling to 2.1 percent in the fourth quarter from a projected 2.6 percent in the April-June period,” NABE said.

The majority of economists now think it is more likely that the economy will grow faster than expected than it is to underperform. Fifty-six percent view risks as skewed to the upside, up from 51 percent in the March survey. Just 15 percent see more risk to the downside, and 29 percent view risks to the outlook as weighted neither to the upside or downside.