CHERRY HILL, N.J., March 20, 2014 /PRNewswire/ -- Snowstorms and freezing temperatures slowed the economy at the start of this year, but spring has just arrived and with it will come brighter prospects for growth, according to a new report by TD Economics ( www.td.com/economics), an affiliate of TD Bank, America's Most Convenient Bank ®.
"Economic momentum in the first quarter was restrained by a number of temporary factors, the biggest of which was an unusually cold winter, says TD Chief Economist Craig Alexander. "As the weather warms up, the fundamentals underpinning growth will come through. With fiscal drag less than half of what it was last year and consumer finances in the best shape in several years, economic growth is set to accelerate."
From a rather mediocre pace of 1.9% in 2013, TD Economics forecasts the economy will grow by 2.7% in 2014 and 3.2% in 2015.
Weather or notIt's not just the weather reports that have been hard to watch in recent months. News on the economy has also been rather sour, with a number of top line indicators like job growth and home sales losing momentum. "The string of bad data has created doubts about the strength of the U.S. economy," says Alexander. "These doubts are misgiven. Comparing economic data and weather across the United States, a pattern emerges – activity was hit hardest where the weather was the worst." Other elements such as expiring unemployment benefits and tax credits for business investment are also weighing on near-term economic growth, but will diminish in the months ahead. "Moving forward, economic momentum of the private sector won't be masked by temporary influences and the government sector," says Alexander. Overall the level of drag from federal fiscal policy, which is estimated to have cut 1.3 percentage points from economic growth in 2013, is likely to fall to around 0.5 percentage points in 2014. Moreover, state and local governments are likely to move from spending cuts to reinvestment.