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Economy in Brief

NABE Projections for Moderate Growth and Inflation Are Little Revised
by Tom Moeller  December 9, 2019

The National Association for Business Economics expectations of 1.8% growth in real GDP during 2020 and 2.3% in 2019 were unchanged from the forecast published early in October. These growth rates are below the 2.9% gain in 2018. Quarterly growth is expected to average 1.9% next year, revised from 1.8%. It follows a quarterly average gain of 2.1% in 2019 and 2.5% in 2018, which was revised lower. Growth in personal consumption expenditures is forecast to ease to 2.4% in 2020 from an unchanged estimate of 2.6% this year. Business fixed investment growth is expected to moderate to 1.7%, revised from 2.1% in 2020, down from a lessened 2.3% during 2019. Expected growth of 1.4% in residential investment next year was revised slightly higher, after a lessened 1.7% decline estimated for 2019. Projected government spending growth was little changed at 1.8% in 2020 and 2.3% in 2019. Deterioration in real net exports is forecast to continue. Estimates of 2.2% import growth in 2020 and 1.4% export growth were slightly lower than expected earlier. The expected rate of inventory investment is still forecast to slow to the lowest speed since 2017.

Housing starts are expected to average 1.28 million units next year, revised from 1.26 million. That compares to a raised forecast of 1.26 million starts this year. Expected light vehicle sales are projected to ease to an unrevised 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 134,000 next year, which was lessened slightly. It remains below the average 175,000 gain expected this year and lower than the high of 251,000 averaged in 2014. Expectations for the unemployment rate in 2020 were unchanged at 3.7%, leaving it at the lowest level since 1968.

Consumer price inflation is forecast to average a lessened 2.0% (Q4/Q4) in 2020. Price inflation next year, as measured by the PCE price index, should pick up to a lessened forecast of 1.9% from a reduced estimate of 1.5% this year. The chain PCE price index excluding food & energy should rise to an unchanged projection of 2.0% growth next year (Q4/Q4) from 1.8% 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 $57 per barrel at the end of next year, revised from $56 and higher than the low of $37 per barrel at the end of 2015.

The forecasted 2.10% interest rate on a ten-year Treasury note at the end of next year was raised slightly from 2.05%. The expected 1.80% rate at the end of this year also was raised a bit. The Federal funds rate of 1.60% projected at the end of next year was unchanged. After-tax corporate profits should rise 2.6% next year. That was little changed from the previous forecast and would be below 4.2% growth in 2017. The expected Federal government budget deficit of $1.075 trillion next year was increased and compares to a raised estimate of $984 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) 1.8 2.3 2.9 2.4 1.6
  Personal Consumption Expenditures 2.4 2.6 3.0 2.6 2.7
  Business Fixed Investment 1.7 2.3 6.4 4.4 0.7
  Residential Investment 1.4 -1.7 -1.5 3.5 6.5
  Gov't Consumption & Gross Investment 1.8 2.3 1.7 0.7 1.8
  Change in Real Business Inventories (Bil. $) 40.5 75.6 48.1 31.7 23.0
  Real Net Exports (Bil. $) -1,005.0 -975.6 -920.0 -849.8 -783.7
Housing Starts (Mil. Units) 1.28 1.26 1.25 1.20 1.17
Light Vehicle Sales (Mil. Units) 16.6 16.9 17.2 17.1 17.5
Payroll Employment Average Monthly Change (000s) 134 175 223 179 193
Civilian Unemployment Rate (%) 3.7 3.7 3.9 4.4 4.9
Chain Price Index for PCE (Q4/Q4 %) 1.9 1.5 1.9 1.8 1.5
 Chain Price Index excl. Food & Energy (Q4/Q4 %) 2.0 1.8 1.9 1.7 1.8
Fed Funds Rate (%, Year-End) 1.60 1.60 2.38 1.38 0.63
10-Year Treasury Note (%, Year-End) 2.10 1.80 2.69 2.40 2.45
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