The Economy

Economists Predict Q2 Rebound

Gross domestic product is predicted to hit 3.1% this quarter, as long as the strong U.S. dollar doesn't derail production.
Katie Kuehner-HebertApril 22, 2015

Economists on average expect the U.S. economy to pick up pace in the second quarter as consumers spend the money they’ve saved on gas — provided the strong dollar doesn’t slow things down, according to a Reuters story on Wednesday.

Reuters’ survey of 85 economists this month forecast gross domestic product expanding at a 3.1% annual pace in the second quarter, compared to an earlier forecast of 3% in last month’s poll. Economists are expecting consumers to spend the money they’ve saved at the gas pump, as savings are at a more than two-year high.

“Consumers have an enormous windfall to spend from lower gasoline prices,” Moody’s senior economist Ryan Sweet told Reuters.

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The survey’s average forecast for the personal consumption expenditures price index excluding food and energy was 1.3% for 2015, rising to 1.7% by 2016.

However, the strong dollar could dampen economic growth by at least half a percentage point this year, according to the survey. Since last June the U.S. dollar has appreciated more than 20% against other currencies.

This scenario could also increase the chances that the Fed will wait until at least September to begin raising interest rates, the economists told Reuters.

Survey respondents forecast the federal funds rate at 0.375% at the end of the third quarter, down from a prediction of 0.50% in the March poll. The benchmark overnight lending rate was forecast at 0.625% at the end of 2015, down from 0.75% in the March survey.

“The slow momentum will likely complicate the case of a June rate hike,” TD Securities’ deputy chief economist Millan Mulraine told Reuters. “We see the September meeting as the earliest point at which conditions will provide the necessary confidence in the sustainability of the economic recovery.”