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Economy in Brief

NABE Predicts Improving Economic Growth
by Tom Moeller  September 29, 2014

The National Association for Business Economics has released new forecasts for U.S. real economic activity. Expectations for 3.0% real GDP growth in 2015 were little-changed but this year's advance was lessened to 2.1% due to the Q1 weather-related decline in activity. Starting this quarter growth is expected to hold steady at roughly 3.0% through yearend 2015. Forecasted personal consumption expenditures growth held at a moderate 2.8%, its quickest growth rate since 2006. Growth in business investment in equipment & software is expected to remain firm at 4.2% while growth in spending on nonresidential structures should be roughly steady at 5.7%. Residential investment should continue to be the economy's strongest sector with a lessened 9.2% increase in 2015 after a 2.7% rise this year. The rate of inventory investment should diminish next year after a strengthened 2014 gain. Real net exports are expected to deteriorate slightly.

Forecasts for housing starts again were pared back slightly to 1.17 million in 2015 after 1.00 million during this year. Expectations for light vehicle sales were raised to 16.7 million after an expected 16.3 million this year. Forecasted average monthly gains in payroll employment were little-changed at 211,000 next year. The unemployment rate should average a lessened 5.7% next year after a downwardly revised estimate of 6.1% this year. The forecast for consumer price inflation remains low at 2.1% versus 1.9% projected for 2014.

The forecasted 3.50% interest rate on 10-year Treasury notes at the end of next year is lower than projected earlier and compares to a downwardly revised 2.80% at the end of this year. The Fed is expected to raise rates in the second quarter of 2015, earlier than projected. The forecasted 6.1% gain in corporate profits next year is little-changed but growth this year was pulled back to 4.1%. The Federal government budget deficit is expected to shrink to a little-changed $490 billion in 2015, roughly 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) 3.0 2.1 2.2 2.3
  Personal Consumption Expenditures 2.8 2.3 2.4 1.8
  Nonresidential Structures 5.7 7.2 -0.5 13.1
  Nonresidential Equipment & Software 4.2 3.7 4.6 6.8
  Residential Investment 9.2 2.7 11.9 13.3
  Change in Real Business Inventories (Bil. $) 56.6 67.0 63.5 57.0
  Real Net Exports (Bil. $) -454.1 -448.9 -420.4 -452.5
Housing Starts (Mil. Units) 1.17 1.00 0.92 0.78
Light Vehicle Sales (Mil. Units) 16.7 16.3 15.5 14.4
Payroll Employment Average Monthly Change (000s) 211 228 194 186
Unemployment Rate (%) 5.7 6.1 7.4 8.1
Consumer Price Index (Y/Y %) 2.1 1.9 1.5 2.1
Fed Funds Rate (%, Year End) 0.845 0.125 0.125 0.125
10-Year Treasury Note (%, Year End) 3.50 2.80 3.04 1.78
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