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Economy in Brief

NABE Expectation for Moderate 2017 Economic Growth Is Little-Changed
by Tom Moeller  December 5, 2016

The National Association for Business Economics forecast for 2.2% real U.S. economic growth next year compared to 2.3% in the last survey. This year's estimate also held fairly steady at 1.6%. The gains follow 2.6% in 2015 and a 2014 advance of 2.4%. Quarterly GDP growth is expected to range between 2.0% and 2.3%. Growth in personal consumption expenditures is expected to moderate to 2.5% next year following 2.6% growth in 2016 and a 3.2% gain in 2015. Expected growth in business fixed investment of 3.0% compares to a 0.4% decline this year. Residential investment growth is expected to moderate to 3.4% next year versus the earlier estimate of 6.1%. Growth this year of 4.3% is down sharply from 11.7% in 2015. Government spending growth is projected to be fairly stable at 0.9%, reduced from 1.8% in 2015. Expected deterioration in real net exports was lessened slightly, but expected import growth of 3.7% still outpaces the 2.6% gain in exports. The rate of inventory investment is expected to increase next year versus 2016, but remain below the gains from 2012 to 2015.

Housing starts are expected to average 1.26 million next year, less than expected earlier. Expected light vehicle sales of 17.2 million units next year was unchanged, and 2016's estimate was raised slightly to 17.4 million. Average monthly gains in payroll employment are expected to slow to 168,000 next year, unchanged from the earlier estimate. Growth had strengthened to 251,000 in 2014. Expectations for the unemployment rate of 4.7% next year were raised from 4.6%.

Consumer price inflation is expected to average 2.3% next year, up from the last projection of 2.2%. The core PCE price index should rise 1.9% next year, the strongest gain since 2007, but down from the previous expectation of 2.0%. The cost of crude oil is expected to average $52 per barrel next year, up from $47 this year.

The forecasted 2.55% interest rate on 10-year Treasury notes at the end of next year was increased from 2.40%, and follows a raised 2.04% estimate at the end of this year. The Fed is expected to continue raising the federal funds rate to 1.13% by the end of next year. Corporate profits next year should rise 4.0%, as expected earlier, following a raised estimate of 1.5% growth for 2016. The Federal government budget deficit is expected to be $618 billion in 2017, up slightly from earlier projections.

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

National Association For Business Economics 2017 2016 2015 2014
Real GDP (% Chg. SAAR) 2.2 1.6 2.6 2.4
  Personal Consumption Expenditures 2.5 2.6 3.2 2.9
  Business Fixed Investment 3.0 -0.4 2.1 6.0
  Residential Investment 3.4 4.3 11.7 3.5
  Gov't Consumption & Gross Investment  0.9 0.8  1.8 -0.9
  Change in Real Business Inventories (Bil. $) 34.0 18.8 84.0 57.7
  Real Net Exports (Bil. $) -585.0 -550.0 -540.0 -425.7
Housing Starts (Mil. Units) 1.26 1.16 1.11 1.00
Light Vehicle Sales (Mil. Units) 17.2 17.4 17.4 16.5
Payroll Employment Average Monthly Change (000s) 168 178 229 251
Civilian Unemployment Rate (%) 4.7 4.9 5.3 6.2
Consumer Price Index (Y/Y %) 2.3 1.2 0.1 1.6
Fed Funds Rate (%, Year-End) 1.13 0.63 0.38 0.13
10-Year Treasury Note (%, Year-End) 2.55 2.04 2.27 2.17
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