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Economy in Brief

NABE Forecasts Moderate Economic Improvement & Low Inflation
by Tom Moeller February 27, 2012

The first look at the economic forecast for 2013 by the National Association for Business Economics indicated a modest pickup in growth and pricing power. In 2013, real GDP growth should average 2.8% versus 2.3% expected for this year, little changed from 2.4% forecasted earlier. Expectations for growth in various sectors continue to show improvement. Consumer spending next year is expected to rise 2.3%, a slight pickup from this year. Growth in business fixed investment should power along at a comparatively strong 7.3% rate. That growth is down, however, from double-digits early in the recovery. Residential investment is expected to improve in 2013 from its moderate gain this year.

Expectations call for 850,000 housing starts, after an upwardly revised 700,000 for this year. Expected light vehicle sales show further improvement to 14.6M after a raised 2012 expectation for 14.0M. Forecasted monthly gains in payroll employment of 183,000 also are improved after upwardly revised 2012 expected gains of 170,000. The unemployment rate is expected to fall faster and average 7.8% for all of next year. The forecast for consumer price inflation remains low at 2.3% versus 2.1% for 2012. Crude oil prices should average $105 at yearend 2013 versus $100 at the end of this year.

Recent improvement in the bond market is expected to end with firmer economic growth. Long-term interest rates of 3.00% at year-end 2013 are up 100 basis points from now and compare to steady short-term rates. Better economic growth is projected to generate improved corporate profitability. The forecast for 7.0% profits growth in 2013 is up slightly from 6.3% this year. However, these rates remain well below the 19.0% gain in 2010 and 12.6% growth in 2009 when the recovery first got going. Moderate economic growth is forecast to reduce the federal government budget deficit to $876 billion in 2013 versus its $1.4 trillion 2009 peak.

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

National Association For Business Economics 2013 2012 2011 2010 2009
Real GDP (% Chg. SAAR) 2.8 2.3 1.7 3.0 -3.5
  Personal Consumption Expenditures 2.3 2.1 2.2 2.0 -1.9
  Nonresidential Structures 5.1 4.2 4.1 -15.8 -21.2
  Producers' Durable Equipment & Software 7.3 8.1 10.3 14.6 -16.0
  Residential Investment 10.0 6.6 -1.4 -4.3 -22.2
  Change in Real Business Inventories (Bil. $) 49.2 45.7 35.6 58.8 -144.9
  Real Net Exports (Bil. $) -397.2 -404.0 -412.3 -421.8 -358.8
Housing Starts (Mil. Units) 0.85 0.70 0.61 0.59 0.55
Light Vehicle Sales (Mil. Units) 14.6 14.0 12.7 11.6 10.4
Payroll Employment Avg. Monthly Change (000s) 183 170 152 86 -422
Unemployment Rate (%) 7.8 8.3 9.0 9.6 9.3
Consumer Price Index (Y/Y %) 2.3 2.1 3.1 1.6 -0.3
Fed Funds Rate (%, Year End) 0.125 0.125 0.125 0.125 0.125
10-Year Treasury Note (%, Year End) 3.00 2.50 1.89 3.30 3.85
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