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Economy in Brief

NABE Revises Growth Forecast Down Slightly
by Tom Moeller  May 16, 2011

The National Association for Business Economics reported a downward revision to its latest growth forecast. For this year, real GDP growth should average 2.8%, versus 3.3% expected three months ago. For next year, growth is expected to continue at a 3.2% rate, revised down from 3.4% expected three months ago. Lowered expectation for consumer spending accounted for much of the revision. It's expected to rise 2.8% both this year and next. Also revised slightly lower were expectations for growth in business fixed investment. Residential was revised up for next year but down for this.

Expectations for housing starts were revised lower to 0.82M next year but expected light vehicle sales were held steady at 14.0M and they 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 8.2% for all of next year. Higher energy prices forced upward revisions to consumer price inflation to 2.8% this year and 2.1% in 2011. The bond market is, however, expected to demand more of an inflation premium. Unchanged were expected long-term interest rates at 4.5% by the end of next year after a raised forecast of 3.9% at the end of 2011. Crude oil prices are expected to average $103 in 2012 versus a $105 average in 2011.

Improved economic growth is projected to generate positive growth in corporate profitability. However, the 9.2% growth rate for next year and 8.5% for this year remain well below the 30% 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) 3.2 2.8 2.9 -2.6 0.0
  Personal Consumption Expenditures 2.8 2.8 1.7 -1.2 -0.3
  Nonresidential Structures 4.4 2.8 -13.7 -20.4 5.9
  Producers' Durable Equipment & Software 9.5 11.9 15.3 -15.3 -2.4
  Residential Investment 13.3 0.9 -3.0 -22.9 -24.0
  Change in Real Business Inventories (Bil. $) 50.6 52.3 62.7 -113.1 -37.6
  Real Net Exports (Bil. $) -404.8 -403.6 -421.9 -363.0 -504.1
Housing Starts (Mil. Units) 0.82 0.61 0.59 0.55 0.91
Light Vehicle Sales (Mil. Units) 14.0 13.2 11.6 10.4 13.2
Payroll Employment Avg. Monthly Change (000s) 203 190 78 -422 -300
Unemployment Rate (%) 8.2 8.7 9.6 9.3 5.8
Consumer Price Index (Y/Y %) 2.1 2.8 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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