Unemployment will drop through the Bank of England's 7% threshold early this year, it predicted today.
NIESR also said the public sector finances will be in surplus in 2018-19 and interest rates will rise in the second quarter of 2015.
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Brooke Hollingshead, communications officer for NIESR, said: "We expect consumer spending to remain the key driver of recovery in 2014 and 2015, supported by continued buoyancy in the housing market.
"There is considerable uncertainty over the magnitude of the impact of the second Help to Buy Scheme: stronger house price inflation would lead to even stronger consumer spending growth in 2014."
The fact consumer price inflation returned to the Bank of England's target rate in December, raised the prospect of a resumption of real consumer wage growth, NIESR said.
Regarding the budget deficit, Ms Hollingshead said: "We expect the overall budget, including investment spending, to have just moved into surplus in 2018-19.
"However, this reflects both a very sharp squeeze on government consumption, and continued low levels of public sector investment."
Meanwhile, the Office for National Statistics announced today the UK's deficit on trade in goods and services was estimated to have been £1.0 billion in December, compared with £3.6 billion in November.
There was a deficit of £7.7 billion on goods, partly offset by an estimated surplus of £6.7 billion on services.