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Economy in Brief

NABE Says Economic Growth Will Be Higher In 2011
by Tom Moeller  February 28, 2011

The National Association for Business Economics indicated an upward revision to its latest growth forecast. For this year, real GDP growth should average 3.3%, versus 2.6% expected three months ago. For next year, growth is expected to continue at a 3.4% rate. Underpinning the expansion is the consumer whose spending is expected, in 2011, to rise a still-moderate 3.2%, versus a 2.4% forecast three-months ago. Next year growth should continue at a 2.9% rate. Also revised higher were expectations for growth in business and residential investment.

Expectations for housing starts and light vehicle sales were ratcheted up slightly for this year and continued growth is expected in 2012, though levels should remain well below their pre-recession peaks. Also, gains in payroll employment were improved at roughly 200,000 per month for both this year and next as the unemployment rate is expected to fall modestly to 8.4% for all of next year. The moderate nature of the recovery is forecast to lend  modest upward pressure to consumer prices; up 1.9% for all of next year. The bond market is, however, expected to demand more of an inflation premium. Long-term interest rates are expected to be 4.5% by the end of next year versus 3.3% at the end of 2010. Crude oil prices are expected to average $96 in 2012 versus a $93 average in 2011.

Improved economic growth is projected to generate positive growth in corporate profitability. However, the 6.5% growth rate for next year and 9.8% for this year remain well below the 25% 2010 increase. Moderate economic growth also is expected to reduce the federal government budget deficit to $1.1 trillion in 2012 from its $1.4 trillion peak this year.

The figures from the latest NABE report can be found in Haver's SURVEYS database.

National Association For Business Economics 2012 2011 2010 2009 2008
Real GDP (% Chg. SAAR) 3.4 3.3 2.8 -2.6 0.0
  Personal Consumption Expenditures 2.9 3.2 1.8 -1.2 -0.3
  Nonresidential Structures 4.8 1.4 -13.8 -20.4 5.9
  Producers' Durable Equipment & Software 10.4 12.1 15.1 -15.3 -2.4
  Residential Investment 12.0 4.4 -3.0 -22.9 -24.0
  Change in Real Business Inventories (Bil. $) 48.7 46.5 60.4 -113.1 -37.6
  Real Net Exports (Bil. $) -435.6 -423.8 -421.8 -363.0 -504.1
Housing Starts (Mil. Units) 0.85 0.66 0.59 0.55 0.91
Light Vehicle Sales (Mil. Units) 14.0 13.0 11.6 10.4 13.2
Payroll Employment Avg. Monthly Change (000s) 216 178 76 -422 -300
Unemployment Rate (%) 8.4 9.1 9.6 9.3 5.8
Consumer Price Index (Y/Y %) 1.9 1.8 1.6 -0.3 3.8
Fed Funds Rate (%, Year End) 1.500 0.125 0.125 0.125 0.125
10-Year Treasury Note (%, Year End) 4.50 3.90 3.30 3.85 2.25
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