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Economy in Brief

NABE Retains Forecast for Improved Growth and Higher Inflation
by Tom Moeller  June 8, 2015

The National Association for Business Economics forecast of 2.9% growth in U.S. real economic activity in 2016 was unrevised from expectations posted three months ago. Expected growth of 2.4% this year was, however, lowered from 3.1%. Quarterly GDP growth is expected to hold fairly steady near 3.0%. Forecasted growth in personal consumption expenditures was lowered slightly to 2.9% next year following a 3.1% rise this year. These remain the strongest yearly gains since 2006. Growth in business investment in equipment is expected to remain firm at 5.7% in 2016. Growth in spending on nonresidential structures should improve to 4.6% following this year's previously unexpected decline. Forecasted improvement of 8.4% in residential investment next year was little changed. It thus should continue to be the economy's strongest sector following a lowered 5.1% rise this year. The rate of inventory investment should diminish next year after firming this year and last. Real net exports are expected to deteriorate more than previously expected, producing a larger drag on U.S. GDP growth in 2015 but less of one next year.

Forecasts for housing starts indicate continued growth to 1.28 million in 2016 following a slightly lessened expectation of 1.15 million starts this year. Unrevised expectations for light vehicle sales also show continued improvement to a fifteen year high of 17.00 million units next year, following an expected 16.8 million in 2015. Average monthly gains in payroll employment are expected to ease to 207,000 after strength near 217,000 this year. Both estimates were revised down slightly. Expectations for the unemployment rate were unchanged at an average 5.1% in 2016 following 5.4% this year. Consumer price inflation is expected to increase, as expected earlier, to 2.2%, the quickest rate of increase since 2011.

The forecasted 3.11% interest rate on 10-year Treasury notes at the end of next year follows the estimate of 2.50% at the end of this year. Both figures were reduced slightly from earlier expectations. The Fed is expected to begin raising interest rates next quarter, as forecasted earlier. Corporate profits next year should rise an unrevised 4.7% following a slightly lessened forecast of 3.4% growth this year. The Federal government budget deficit is expected to shrink to $454 billion in 2016, as expected earlier, 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 2016 2015 2014 2013
Real GDP (% Chg. SAAR) 2.9 2.4 2.4 2.2
  Personal Consumption Expenditures 2.9 3.1 2.5 2.4
  Nonresidential Structures 4.6 -1.8 8.2 -0.5
  Nonresidential Equipment 5.7 4.3 6.4 4.6
  Residential Investment 8.4 5.1 1.6 11.9
  Change in Real Business Inventories (Bil. $) 68.0 80.1 70.6 63.5
  Real Net Exports (Bil. $) -537.5 -517.3 -452.6 -420.4
Housing Starts (Mil. Units) 1.28 1.10 1.00 0.92
Light Vehicle Sales (Mil. Units) 17.0 16.8 16.4 15.5
Payroll Employment Average Monthly Change (000s) 207 217 260 199
Unemployment Rate (%) 5.1 5.4 6.2 7.4
Consumer Price Index (Y/Y %) 2.2 0.3 1.6 1.5
Fed Funds Rate (%, Year-End) 1.625 0.500 0.125 0.125
10-Year Treasury Note (%, Year-End) 3.11 2.50 2.17 3.04
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