Ottawa, July 15, 2013—The U.S. economy is in for another year of sluggish growth in 2013, but a rebound in the housing market is expected to lead to stronger gains next year, according to The Conference Board of Canada's U.S. Outlook - Summer 2013.
"Growth in the U.S. economy will pick up toward the end of this year as the impact of the sequester and higher taxes fades," said Kip Beckman, Principal Economist. "Bolstered by the rebound in the U.S. housing market, private sector activity will offset some of the drag on the economy created by the deadlock over fiscal policy."
- The U.S. economy will expand by 2 per cent this year and 3.2 per cent in 2014.
- Higher taxes and steep cuts in government spending will cut 1.5 percentage points from real GDP in 2013.
- Housing starts are forecast to increase in the range of 30 per cent annually over the next two years.
The tight supply of homes currently on the market has resulted in rising prices and increasing residential construction. Housing prices have started to rebound in many parts of the U.S., which, in turn, is boosting household wealth and spending. Real household spending is expected to pick up steam in the second half of this year.
The sharp rebound in the U.S. housing market will also support investment spending on equipment and enable the private sector to grow at a pace of three per cent or better in 2013.
The U.S. economy is on track to grow by two per cent this year. In 2014, the drag on the economy created by the tax increases and sharp cuts in spending under the sequester provisions should wane, which will allow the United States to post a solid gain of 3.2 per cent in real GDP.