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Economy in Brief

NABE Forecast Indicates Continued Economic Expansion
by Tom Moeller  December 9, 2013

The National Association for Business Economics held the median estimate for real GDP growth fairly constant at 2.8% for 2014 versus the 2.9% forecast in its May survey. That follows a lowered 1.6% growth projection for this year. Quarterly growth is expected to be stable at roughly  3.0% next year. Personal consumption expenditures growth is forecast to improve to a still-moderate 2.6% next year. That would, nevertheless, be its fastest growth rate since 2006. Growth in residential investment should continue to be the economy's strongest sector with a second year of 14.0% increase. Growth in business investment in equipment & software is expected to remain firm at 6.0% while growth in spending on nonresidential structures should improve to 4.9%. Inventory investment and real net exports should remain roughly stable at current levels.

Expectations call for a little-revised 1.16 million housing starts in 2014 after 0.95 million during this year. Forecasted light vehicle sales show further improvement to 16.0 million after an expectation of 15.5 million during this year. Forecasted average monthly gains in payroll employment next year of 197,000 were unchanged from the last forecast and up from the 178,000 rise projected for this year. The unemployment rate is expected to average 7.0% for all of next year, a slight downward revision. The forecast for consumer price inflation remains low at 2.1% versus a downwardly revised 1.6% projection for 2013. Expectations for the core PCE price index are for a 1.7% advance in 2014 after a 1.3% rise this year.

Recent improvement in the bond market is expected to end with continued economic growth. The forecasted 3.29% interest rate on 10-year Treasury notes at the end of next year was raised from 2.81% last forecast but the Fed still is not expected to raise rates. The forecast for 7.2% corporate profit growth in 2014 is improved from a 5.0% rise this year. These growth rates remain well below the 22.2% gain in 2010, when the economic recovery first got going, and 19.2% growth in 2012. Moderate economic growth is forecast to reduce the Federal government budget deficit to $650 billion in 2014, half its $1.4 trillion peak in 2009.

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

National Association For Business Economics 2014 2013 2012 2011
Real GDP (% Chg. SAAR) 2.8 1.6 2.8 1.8
  Personal Consumption Expenditures 2.6 2.0 2.2 2.5
  Nonresidential Structures 4.9 -1.1 12.7 2.1
  Producers' Durable Equipment & Software 6.0 4.0 7.6 12.7
  Residential Investment 14.0 13.8 12.9 0.5
  Change in Real Business Inventories (Bil. $) 45.0 46.5 57.6 33.8
  Real Net Exports (Bil. $) -438.4 -432.4 -430.8 -445.9
Housing Starts (Mil. Units) 1.16 0.95 0.78 0.61
Light Vehicle Sales (Mil. Units) 16.0 15.5 14.4 12.7
Payroll Employment Avg. Monthly Change (000s) 197 178 183 175
Unemployment Rate (%) 7.0 7.5 8.1 8.9
Consumer Price Index (Y/Y %) 2.1 1.6 2.1 3.1
Fed Funds Rate (%, Year End) 0.125 0.125 0.125 0.125
10-Year Treasury Note (%, Year End) 3.29 2.76 1.78 1.89
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