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Economy in Brief

NABE Forecast Shows Improved Economic Growth in 2015
by Tom Moeller  March 24, 2014

The National Association for Business Economics released its median estimate for real GDP growth in 2015 and it's expected to improve to 3.1% from an unchanged estimate of 2.8% during 2014. Quarterly growth is expected to hold steady at 3.1% next year. Personal consumption expenditures growth is forecast to improve to a moderate 2.9%, its quickest growth rate since 2006. Growth in residential investment should continue to be the economy's strongest sector with a 12.0% increase after a lowered 9.0% rise this year. Growth in business investment in equipment & software is expected to remain firm at 4.1% while growth in spending on nonresidential structures should hold roughly steady at an improved at 5.1%. The rate of inventory investment should diminish this year and next after a pumped-up 2013 gain. Real net exports are expected to deteriorate slightly.

Expectations call for a further gain in housing starts to 1.30 million in 2015 after 1.07 million during this year. Forecasted light vehicle sales show further improvement to 16.5 million after an expectation of 16.0 million. Forecasted average monthly gains in payroll employment of 205,000 next year are improved from 188,000 projected for this year. The unemployment rate is expected to average 6.1% next year after a downwardly revised estimate of 6.4%. The forecast for consumer price inflation remains low at 2.0% versus a downwardly revised 1.7% projection for 2014. Expectations for the core PCE price index are for a 1.8% advance in 2015 after a 1.6% estimate for this year.

The bond market is expected to sustain its recent losses with continued economic growth. The forecasted 3.80% interest rate on 10-year Treasury notes at the end of next year compares to a little-revised 3.30% at the end of this year. The Fed is expected to begin raising rates in the third quarter of 2015. The forecast for 7.3% corporate profit growth in 2015 is improved from a slightly reduced 5.0% rise this year. These growth rates remain well below the 22.2% gain in 2010 when the economic recovery first got going. Moderate economic growth is forecast to reduce the Federal government budget deficit to $536 billion in 2015, nearly one-third 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 2015 2014 2013 2012
Real GDP (% Chg. SAAR) 3.1 2.8 1.9 2.8
  Personal Consumption Expenditures 2.9 2.6 2.0 2.2
  Nonresidential Structures 5.1 5.7 1.4 12.7
  Producers' Durable Equipment & Software 4.1 4.0 3.1 7.6
  Residential Investment 12.0 9.0 12.1 12.9
  Change in Real Business Inventories (Bil. $) 48.4 59.9 83.0 57.6
  Real Net Exports (Bil. $) -406.3 -385.0 -412.3 -430.8
  Real Government Consumption & Gross Investment 0.5 -0.4 -2.3 -1.0
Housing Starts (Mil. Units) 1.30 1.07 0.92 0.78
Light Vehicle Sales (Mil. Units) 16.5 16.0 15.5 14.4
Payroll Employment Average Monthly Change (000s) 205 188 194 186
Unemployment Rate (%) 6.1 6.4 7.4 8.1
Consumer Price Index (Y/Y %) 2.0 1.7 1.5 2.1
Fed Funds Rate (%, Year End) 0.750 0.125 0.125 0.125
10-Year Treasury Note (%, Year End) 3.80 3.30 3.04 1.78
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