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Economy in Brief

NABE Projects Slower Growth and Stable Inflation
by Tom Moeller  March 25, 2019

The National Association for Business Economics expects 2.0% growth in real GDP during 2020 following 2.4% growth in 2019, revised from the prior forecast of 2.7%. Both growth rates are below the 2.9% advance in 2018. Quarterly growth is expected to average 1.84% next year. That follows an average 2.13% in 2019 and 3.10% in 2018. Growth in personal consumption expenditures is forecast to slow to 2.2%, down from 2.6% this year and last year. It would be the slowest growth rate since 2013. Business fixed investment growth also is expected to moderate to 2.9%, down from 7.0% growth during 2018. Expected growth of 1.9% in residential investment is improved from no growth this year and last. Government spending growth is projected to moderate to 1.2% from 1.9% in 2019. Deterioration in real net exports is forecast to continue as expected earlier. Import growth of 3.9% next year outpaces a 3.6% advance in exports. The rate of inventory investment is expected to slow to the lowest speed since 2017.

Housing starts are expected to average an improved 1.29 million next year. Expected light vehicle sales are expected to ease to 16.6 million units, down from the high of 17.5 million in 2016. The average monthly gain in payroll employment is expected to slow to 127,000, down from the 251,000 average in 2014. Expectations for the unemployment rate of 3.7% would leave it at the lowest level since 1969.

Consumer price inflation is expected to average a steady 2.1% (Q4/Q4). Price inflation as measured by the PCE price index also is expected to remain steady at 2.0%. The chain PCE price index excluding food & energy should rise 2.1% next year (Q4/Q4). This latter expectation was shaved slightly. Still, it would be the quickest growth since 2007, up from the 2010 low of 0.9%. The cost of crude oil is expected to average $61 per barrel at the end of next year, higher than the low of $37 per barrel at the end of 2015.

The forecasted 3.18% interest rate on a ten-year Treasury note at the end of next year was lower than the expectation of 3.00% at the end of this year, revised from 3.5%. The Fed is expected to hold the federal funds rate at 2.60%, down from the prior expectation of a rise to 3.10% by the end of 2019. Corporate profits after-tax next year should rise 3.5% next year, about the same as in 2019 but down from 7.3% growth in 2018. The expected Federal government budget deficit of $1.025 billion next year compares to $960 billion in FY'19.

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

National Association For Business Economics 2020 2019 2018 2017 2016
Real GDP (% Chg. SAAR) 2.0 2.4 2.9 2.2 1.6
  Personal Consumption Expenditures 2.2 2.6 2.6 2.5 2.7
  Business Fixed Investment 2.9 4.5 7.0 5.3 0.5
  Residential Investment 1.9 -0.2 -0.2 3.3 6.5
  Gov't Consumption & Gross Investment 1.2 1.9 1.5 -0.1 1.4
  Change in Real Business Inventories (Bil. $) 40.9 56.1 45.1 22.5 23.4
  Real Net Exports (Bil. $) -1,018.3 -977.7 -914.1 -858.7 -786.2
Housing Starts (Mil. Units) 1.29 1.27 1.24 1.20 1.17
Light Vehicle Sales (Mil. Units) 16.6 16.8 17.2 17.1 17.5
Payroll Employment Average Monthly Change (000s) 127 173 223 179 193
Civilian Unemployment Rate (%) 3.7 3.7 3.9 4.4 4.9
Chain Price Index for PCE (Q4/Q4 %) 2.0 2.0 1.9 1.8 1.6
 Chain Price Index excl. Food & Energy (Q4/Q4 %) 2.1 2.0 1.9 1.6 1.8
Fed Funds Rate (%, Year-End) 2.60 2.60 2.38 1.38 0.63
10-Year Treasury Note (%, Year-End) 3.18 3.00 2.69 2.40 2.45
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