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Economy in Brief

NABE Consensus Projections Call for Weaker Growth and Stable Inflation
by Tom Moeller  June 3, 2019

The National Association for Business Economics expects 2.1% growth in real GDP during 2020 following 2.6% growth in 2019, revised from 2.0% and 2.4% in the prior forecast. Both of these growth rates are below the 2.9% gain in 2018. Quarterly growth is expected to average 2.0% next year. It follows a quarterly average gain of 2.4% in 2019 and 3.0% in 2018. Growth in personal consumption expenditures is forecast to ease to 2.3% in 2020, revised from 2.2%, and down from a lowered estimate of 2.4% this year and 2.6% last year. It would be the slowest growth rate since 2013. Business fixed investment growth also is expected to moderate to an upwardly revised estimate of 3.5%, down from 6.9% growth during 2018. Expected growth of 1.7% in residential investment improves after a deepened 1.3% decline this year. Government spending growth is projected to moderate to 1.4% from 1.8% in 2019. Deterioration in real net exports is forecast to continue. Import growth of 4.0% next year outpaces a 3.6% advance in exports. The rate of inventory investment is expected to slow to the lowest speed since 2018.

Housing starts are expected to average an improved 1.28 million next year, revised from 1.29 million,. That compares to 1.25 million this year and last. Expected light vehicle sales are expected to ease to 16.6 million units, down from the peak of 17.5 million in 2016. The average monthly gain in payroll employment is expected to slow to 139,000, which was revised from 127,000. It remains below the average 178,000 gain this year and the 251,000 average in 2014. Expectations for the unemployment rate were reduced to 3.6% which would leave it at the lowest level since 1968.

Consumer price inflation is expected to average a reduced 2.1% (Q4/Q4). Price inflation, as measured by the PCE price index, is expected to pick up to an unchanged estimate of 2.0% from 1.9% this year. The chain PCE price index excluding food & energy should rise to a lowered projection of 2.0% next year (Q4/Q4) from 1.7% in 2019. 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 $60 per barrel at the end of next year, higher than the low of $37 per barrel at the end of 2015.

The forecasted 2.90% interest rate on a ten-year Treasury note at the end of next year was reduced from the prior expectation of 3.18%. The expected 2.70% rate at the end of this year was reduced from 3.00%. The Fed is expected to hold the federal funds rate at 2.50%, down from the prior expectation of 2.40% by the end of 2019. After-tax corporate profits should rise 3.3% next year. That would be less than the 4.6% gain in 2019 and lower than the 6.3% growth in 2018. The expected Federal government budget deficit of $1.033 billion next year was slightly increased and compares to $940 billion in FY'19.

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

Remarks on the Current Stance of U.S. Monetary Policy from St. Louis Fed President & CEO James Bullard are available here.

National Association For Business Economics 2020 2019 2018 2017 2016
Real GDP (% Chg. SAAR) 2.1 2.6 2.9 2.2 1.6
  Personal Consumption Expenditures 2.3 2.4 2.6 2.5 2.7
  Business Fixed Investment 3.5 4.1 6.9 5.3 0.5
  Residential Investment 1.7 -1.3 -0.3 3.3 6.5
  Gov't Consumption & Gross Investment 1.4 1.8 1.5 -0.1 1.4
  Change in Real Business Inventories (Bil. $) 50.5 82.5 45.0 22.5 23.4
  Real Net Exports (Bil. $) -957.0 -913.5 -912.2 -858.7 -786.2
Housing Starts (Mil. Units) 1.28 1.25 1.25 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) 139 178 223 179 193
Civilian Unemployment Rate (%) 3.6 3.7 3.9 4.4 4.9
Chain Price Index for PCE (Q4/Q4 %) 2.0 1.9 1.9 1.8 1.6
 Chain Price Index excl. Food & Energy (Q4/Q4 %) 2.0 1.7 1.9 1.6 1.8
Fed Funds Rate (%, Year-End) 2.50 2.40 2.38 1.38 0.63
10-Year Treasury Note (%, Year-End) 2.90 2.70 2.69 2.40 2.45
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