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Economy in Brief

NABE 2019 Forecast is Little Changed; Moderate Growth& Higher Inflation
by Tom Moeller  June 04, 2018

The National Association for Business Economics forecasts 2.7% growth in real GDP during 2019 following an expected 2.8% rise this year, revised from the earlier forecast of 2.9% 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 2.6% gain in 2018, revised from 2.9%. Robust expected growth in business fixed investment of 4.8%, revised from 4.6%, should follow a 5.8% advance this year, revised from 5.3%. These are 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 1.8%, revised from 1.3%. Deterioration in real net exports is forecast to continue as expected import growth of 4.7% 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 1.35 million next year, revised from 1.33 million. Expected light vehicle sales were unchanged at 16.8 million units in 2019, the lowest since 2014. Average monthly gains in payroll employment are expected to slow to a little-changed 154,000, down from the 250,000 average in 2014. Expectations for the unemployment rate were lowered to 3.7% from 3.8% for next year and would leave it at the lowest level since 1969.

Consumer price inflation is expected to average a lessened 2.2% (Q4/Q4). Price inflation as measured by the PCE price index is expected to average 2.1%, revised from 1.9% the same as in 2018 which also was revised up. The chain PCE price index excluding food & energy should rise, however, to 2.1% (Q4/Q4), the same as forecasted earlier. The cost of crude oil is expected to average $65 per barrel at the end of next year, revised from $ 60 per barrel, versus $65 this coming December.

The forecasted 3.50% interest rate on 10-year Treasury notes at the end of 2019 was lowered slightly and compares to an unchanged estimate of 3.20% at the end of this year. The Fed is expected to continue raising the federal funds rate to 2.88% by the end of 2019, revised from 2.75%. Corporate profits after-tax next year should rise a little-changed 4.8% after 6.3% growth this year. The expectation for the Federal government budget deficit of $987 billion next year was revised down from $1.019 trillion, and compares to a raised estimate of $800 billion in 2018.

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

Is GDP Overstating Economic Activity? from the Federal Reserve Bank of San Francisco can be found here.

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National Association For Business Economics 2019 2018 2017 2016 2015
Real GDP (% Chg. SAAR) 2.7 2.8 2.3 1.5 2.9
  Personal Consumption Expenditures 2.5 2.6 2.8 2.7 3.6
  Business Fixed Investment 4.8 5.8 4.7 -0.6 2.3
  Residential Investment 3.4 3.3 1.8 5.5 10.2
  Gov't Consumption & Gross Investment 1.8 1.7 0.1 0.8 1.4
  Change in Real Business Inventories (Bil. $) 48.0 40.1 15.2 33.4 100.5
  Real Net Exports (Bil. $) -704.6 -658.0 -621.8 -586.3 -545.3
Housing Starts (Mil. Units) 1.35 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) 154 192 182 195 226
Civilian Unemployment Rate (%) 3.7 3.9 4.4 4.9 5.3
Chain Price Index for PCE (Q4/Q4 %) 2.1 2.1 1.7 1.6 0.4
 Chain Price Index excl. Food & Energy (Q4/Q4 %) 2.1 2.2 1.5 1.9 1.3
Fed Funds Rate (%, Year-End) 2.88 2.20 1.38 0.63 0.38
10-Year Treasury Note (%, Year-End) 3.50 3.20 2.40 2.45 2.27
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