Higher consumer spending will offset sequester cuts, economists say

Shoe shoppers at a Skechers store in San Francisco.
(Justin Sullivan / Getty Images)

WASHINGTON -- Consumers will help keep economic growth on track this year, as new projections of their spending indicate it will offset the hit to the recovery from the federal government’s automatic budget cuts, a panel of economists said Monday.

The National Assn. for Business Economics estimated that the nation’s economic output would grow 2.4% this year, the same as the group projected in February.

That’s up from 1.7% growth in 2012. And the organization said growth should pick up to 3% in 2014.

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But in issuing a revised outlook, the panel of 49 professional forecasters said the automatic federal spending cuts known as sequestration would be a bigger drag on growth than anticipated three months ago.


At that time, before the cuts kicked in March 1, the potential impact was unclear as Washington politicians scrambled to scale them back or delay them.

The economists now project that government consumption expenditures and gross investment will decline 2.3% this year, more than double the 1% drop foreseen in February.

But consumer spending is looking stronger as the housing and labor market recovers.

The panel revised its projections for personal consumption expenditures, saying they would increase 2.3% this year, up from the 1.9% February projection.

And consumer spending will rise 2.6% in 2014, the group said. In February, it estimated 2.5% growth next year.

Consumer spending increased 1.9% in 2012.


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