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Economy in Brief

NABE 2019 Forecast; Moderate GDP Growth & Higher Price Inflation
by Tom Moeller  March 26, 2018

The National Association for Business Economics forecasts 2.7% growth in real GDP during 2019 following an expected 2.9% rise this year, revised up from the earlier forecast of 2.4% growth. Quarterly GDP growth is expected to average 2.8% this year, then 2.6% next year. Growth in personal consumption expenditures is forecast to ease next year to 2.5% from a 2.9% gain in 2018. Robust expected growth in business fixed investment of 4.6% should follow a 5.3% advance this year, the quickest rates of growth since 2014. Residential investment growth also is expected to improve a steady 3.4% next year. Government spending growth is projected to remain modest at 1.3%. Deterioration in real net exports is forecast to continue as expected import growth of 4.8% next year outpaces a 4.2% advance in exports. The rate of inventory investment is expected to improve slightly next year, but remain below the gains from 2012 to 2015.

Housing starts are expected to average 1.33 million next year, the strongest level since 2007. Expected light vehicle sales of 16.8 million units in 2019 are the lowest since 2014. Average monthly gains in payroll employment are expected to slow to 159,000, down from the 250,000 average in 2014. Expectations for the unemployment rate of 3.8% next year would leave it at the lowest level since 1969.

Consumer price inflation is expected to average a stable 2.2% (Q4/Q4). Price inflation as measured by the PCE price index is expected to average 1.9%, the same as in 2018. The chain PCE price index excluding food & energy should rise, however, to 2.1% (Q4/Q4), the strongest gain since 2007. The cost of crude oil is expected to average $60 per barrel at the end of next year, versus $61 this coming December.

The forecasted 3.60% interest rate on 10-year Treasury notes at the end of 2019 is higher than the raised estimate of 3.20% at the end of this year. The Fed is expected to continue raising the federal funds rate to 2.75% by the end of 2019, up from 2.1% at the end of this year. Corporate profits after-tax next year should rise 4.5% after 6.1% growth this year. The expectation for the Federal government budget deficit of $1.019 trillion compares to a raised estimate of $775 billion in 2018.

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

National Association For Business Economics 2019 2018 2017 2016 2015
Real GDP (% Chg. SAAR) 2.7 2.9 2.3 1.5 2.9
  Personal Consumption Expenditures 2.5 2.9 2.7 2.7 3.6
  Business Fixed Investment 4.6 5.3 4.7 -0.6 2.3
  Residential Investment 3.4 3.6 1.8 5.5 10.2
  Gov't Consumption & Gross Investment 1.3 1.5 0.1 0.8 1.4
  Change in Real Business Inventories (Bil. $) 45.4 38.9 13.3 33.4 100.5
  Real Net Exports (Bil. $) -703.3 -677.6 -621.4 -586.3 -545.3
Housing Starts (Mil. Units) 1.33 1.30 1.20 1.17 1.11
Light Vehicle Sales (Mil. Units) 16.8 17.0 17.1 17.5 17.4
Payroll Employment Average Monthly Change (000s) 159 184 182 195 226
Civilian Unemployment Rate (%) 3.8 3.9 4.4 4.9 5.3
Chain Price Index for PCE (Q4/Q4 %) 1.9 1.9 1.7 1.6 0.4
 Chain Price Index excl. Food & Energy (Q4/Q4 %) 2.1 1.9 1.5 1.9 1.3
Fed Funds Rate (%, Year-End) 2.75 2.10 1.38 0.63 0.38
10-Year Treasury Note (%, Year-End) 3.60 3.20 2.40 2.45 2.27
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