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US economy expected to pick up pace

A group of business economists said Monday that they expect the U.S. economy to grow at a faster pace over the next two years. 

The National Association for Business Economics (NABE) said growth will increase at a 3.1 percent rate this year and 2.9 percent in 2016 — both stronger than the 2.4 percent gain last year, according to the March survey. 

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“Healthier consumer spending, housing investment and government spending growth are expected to make outsized contributions to the projected acceleration in overall economic activity,” said NABE President John Silvia, chief economist of Wells Fargo.

The labor market is also expected to be strong, with monthly jobs growth forecast at an average of 250,000 per month through this year and 216,000 a month in 2016. 

The March jobs report is set for release on Friday.

The business economists expect the jobless rate to drop from 5.5 percent in February to 5 percent by the second half of 2016, ahead of next year’s presidential election.

The panel largely expects the Federal Reserve to start hiking interest rates mid-year. 

Behind an improving labor market and other factors, “88 percent of the panelists think the Federal Reserve will start tightening of monetary policy in the second or third quarter of 2015,” Silvia said. 

That is up from 76 percent in December. 

The group expects consumer spending to jump to 3.3 percent this year, faster than the 2.7 percent forecast last month, possibly because of lower gas prices and faster job growth. 

Next year, though, spending could slip to a 3 percent pace, especially amid expectations for higher prices. 

Still, panelists revised their inflation projections for this year “further downward amid a surging U.S. dollar and plunging oil prices,” said Timothy Gill, chairman of NABE’s survey and deputy chief economist of the National Electrical Manufacturers Association. 

Prices could accelerate next year “as oil prices rebound and greenback appreciation slows,” Gill said. 

NABE forecasters continue to expect a faster pace of housing sector growth over the next two years: about 6.6 percent this year and 8.2 percent in 2016. 

Housing construction should climb to 1.2 million units this year from 1 million in 2014, slightly above the 1.15 million units forecast in December. The panel expects housing starts to increase to 1.3 million units in 2016. 

Expect housing prices to rise, too — about 4.5 percent this year and 4 percent in 2016. 

In addition, the group is calling for a wider trade gap this year on slower export growth amid a pick-up in imports.