The International Monetary Fund believes the U.S. economy is weaker than Federal Reserve analysts do.
In a report released Wednesday, the IMF says it expects growth for the rest of this year to be in the 3 percent to 3.5 percent range. But because of the first quarter contraction, the IMF forecasts that growth for the year as a whole will be a disappointing 1.7 percent.
The Federal Reserve has forecast economic growth in the 2.1 percent to 2.3 percent range for 2014.
While the IMF expects U.S. GDP to grow at a 3 percent rate next year, it predicts that the years following will see a growth rate of just over 2 percent, well below the historic average.
"We see what happened in the first quarter as being largely linked to net exports, which reflected a very strong fourth quarter being offset by a weak first quarter," Nigel Chalk, deputy director of the IMF's Western Hemisphere Department, told reporters today.
Chalk added that the first quarter contraction was also affected by the weather and an inventory adjustment, which the IMF had expected to be spread out over the whole year instead taking place almost entirely in the first quarter.
"I think where we are different than some is that we really see those ... as being one-off factors that won't be caught up later in the year," he said. "So we're not going to see an acceleration of growth in the second quarter because we don't think there was pent-up demand that was constrained in the first quarter and then will spill into the second quarter."
However, the IMF believes that, barring unforeseen shocks, next year will accelerate to the fastest annual pace since 2005, propelled by strong consumption growth, a declining fiscal drag, a pickup in residential investment, and easy financial conditions.
The biggest threats to the economy, according to the report, are possible slowing growth in emerging markets, oil price spikes related to events in Ukraine and Iraq, and earlier-than-expected interest rate hikes.
The report also forecasts slowing growth after that as a result of an aging population and more modest prospects for productivity improvements. The IMF believes the best way to counter those forces is to take immediate steps to raise productivity, augment human and physical capital, and increase labor force participation. The report spotlighted the persistence of poverty despite recent economic growth.
"If you have one-in-six of your population living in poverty we know ... those people are unable to invest in education and build human capital and they tend to be more detached from the labor market," Chalk told reporters. "In a world where you need increases in productivity, increases in human capital and increases in labor force participation, [then] what I would regard as a natural resource of the U.S. economy needs to be brought back in to productive economic use. We see that as a long-run growth issue."
The other key problem facing U.S. long-term economic growth is the continuing decay in the nation's infrastructure. The report cited a study by the American Society of Civil Engineers estimating that $200 billion (about 1.1 percent of GDP) in funding is needed between this year and 2020 to pay for infrastructure improvements.
Increasing infrastructure spending, "not just fixing the issues related to the highway trust fund but a broader effort at building infrastructure at the federal and state level, will be important for raising productivity and long-term growth and removing some of the near term obstacles to growth in the U.S. economy," said Chalk.