The U.S. economy will see solid growth starting in the second half of 2013, and for all of 2014, as long as Congress and the Obama Administration don't conspire against it, a leading U.S. economist said today.
Dr. Donald Ratajczak, emeritus professor at Georgia State University's J. Mack Robinson College of Business, forecast full-year GDP growth between three and 3.25 percent, followed by similar expansion in 2014. Most of this year's growth will be back-loaded, with momentum building in the summer and carrying through next year, Ratajczak told the SMC3 annual winter meeting in Atlanta.
The U.S. will experience muted growth in the first half of 2013 as fiscal concerns and ongoing political squabbles affect consumer and business confidence, and the economy works off a temporary condition of elevated auto inventories, he said.
Ratajczak said the uncertainty over fiscal issues and the polarizing climate in Washington remains a concern. However, he predicted that the White House and Congress will ultimately reach compromises on key issues impacting the economy because no one wants to take the political fall for derailing the progress that has been made.
The economist said the "underlying foundation of growth has improved, and will continue to improve" as the year progresses. He said industrial production activity is gaining strength, household wealth is approaching levels last seen prior to the 2007-09 financial crisis and recession, and energy prices have peaked for the year. Inventory levels are in balance, and in the case of building materials, are actually tight, Ratajzak said.
As the housing market recovers after five mostly miserable years, lean inventories of construction materials will spur increased ordering and overall economic growth, he added.
The U.S. will emerge as a major energy producer and exporter as shale oil and gas discoveries in the Dakotas, Montana and Pennsylvania make it an export powerhouse, Ratajczak said. He cited data showing that the U.S. exports the equivalent of $11 billion of petroleum products each month, and is poised to become the world's second-largest producer of liquefied energy materials in two years, overtaking Russia and trailing only Saudi Arabia.
The rock-bottom price of natural gas will be a tremendous tailwind for the U.S. economy in general and the supply chain in particular, according to Ratajczak.
Historically, the market price of crude oil has been about 12 times the market price for natural gas. However, recent mild winter weather, a sluggish economy, and newly abundant resources of natural gas have widened the ratio to about 30 to 1. Ratajzcak predicted that the oil to natural gas ratio will not drop below 25 to 1 for the rest of the decade.
"You will not go back to the historical levels of 12 to 1," he told the audience.
Borrowing costs will remain at historic lows for the next two years as the Federal Reserve maintains a near-zero interest-rate policy, Ratajczak said. He encouraged asset-based truckers and third party logistics providers to leverage the capital markets either to offset higher equipment costs, or to expand their fleets to meet increased demand for freight services.
Ratajczak said inflation will be well contained, with the possible exception of food prices, which have risen in the past year as droughts in farming regions have kept inventories low and have pushed up costs.
"We can't afford another drought," Ratajczak said.
He expressed hope that the recent snowfalls blanketing the Midwest and the Great Plains will provide the winter moisture needed for abundant crop yields.
Gartner, Inc.
