US economy forecast to rise 2.8pc this year, spurring global growth
US economic growth will accelerate this year even as the pace of expansion remains sub-par almost five years after the end of the recession, according to academic economists and former policy-makers.
"There is no reason for pessimism about our near future if we adopt appropriate policies, 2014 is going to be a better year," Martin Feldstein, a professor at Harvard University and chairman of the Council of Economic Advisers under US president Ronald Reagan, said in Philadelphia.
A rise in fortunes for the world's biggest economy is important because it will help give a boost to the recovery in the global economy.
Feldstein pointed to diminishing drag from fiscal policy and an $8 trillion (€6tn) increase in household wealth over the last 12 months from rising stocks and home prices.
The Standard & Poor's 500 Index climbed 30pc last year for its biggest advance since 1997, while house prices rose in October from a year earlier by the most in more than seven years, according to the S&P/Case-Shiller index of values in 20 cities.
JPMorgan Chase & Co is among the Wall Street banks turning more optimistic, predicting this week the US economy will expand 2.8pc this year, an increase from its 2.5pc estimate of a month ago.
Former US Treasury Secretary Lawrence Summers and John Taylor of Stanford University agreed in interviews that stronger growth this year was possible even as they clashed over what more policy-makers could do to speed expansion.
"I'm not arguing with Marty about being a little more optimistic, but I think it's a mistake to say that all's well," Mr Summers, who also teaches at Harvard, said at the annual conference of the American Economic Association.
Taylor, a former Treasury undersecretary, said growth this year "will be better but to me it's still disappointing -- it's not going to be what it could be".
The academics spoke a day after Federal Reserve Chairman Ben S Bernanke told the conference that headwinds to growth may be abating.
He cited a healthier financial industry, greater balance in housing, less fiscal restraint and accommodative monetary policy as reasons for optimism in coming quarters.
"Of course, if the experience of the past few years teaches us anything, it is that we should be cautious in our forecasts," Bernanke said. (Bloomberg)