The economy is likely to continue dragging in a slow recovery this year, the president of the Federal Reserve Bank of Richmond told a Maryland bankers group Friday.
The economy will grow an estimated 2 percent to 2.25 percent, about the same as since the end of the recession, said Jeffrey M. Lacker, whose Federal Reserve district includes Baltimore. Last year ended on a positive note, with improvements in measures such as consumer spending and gross domestic product, the value of the nation's goods and services, he said.
"The pickup in growth late last year is certainly a welcome development, and it may well be a harbinger of stronger growth ahead," Lacker said. "But experience with similar growth spurts in the recent past suggests that it is too soon to make that call."
Businesses still are holding back on hiring and investing, and consumers are likely to remain cautious in the coming year, Lacker said while offering his economic forecast to the Maryland Bankers Association. The group held its annual First Friday economic outlook event at the Renaissance Harborplace Hotel in Baltimore.
"It's no surprise that credit is no longer available on the same terms," he said. "And it's no surprise that consumers have been paying off debt and building up savings in order to restore some sense of balance to their household finances. These developments appear to have contributed to a persistent cautiousness in household spending behavior."
Veronica Cool, principal business relationship manager for Wells Fargo in Baltimore, said businesses still lack the confidence that would help boost loan demand.
While consumer spending appears to be up, "we're not seeing the demand translating" to businesses, she said during a question-and-answer period.
While real estate investment is growing, Lacker said, it will have a "marginal effect" on the overall economy, which is seeing slower growth in both productivity and employment.
Nothing on the horizon is expected to lead to a surge in productivity, but at the same time, "it's hard to believe productivity has hit a plateau," Lacker said.