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Economy in Brief

NABE Projects Moderate Recovery in 2021 from a Record Postwar Recession in 2020
by Tom Moeller  June 8, 2020

The National Association for Business Economics expects 3.6% growth in real GDP during 2021. This follows a record recession this year, with GDP expected to contract 5.9%. The National Bureau of Economic Research has specified February 2020 as the business cycle peak. Quarterly growth is expected to average 4.5% next year after declining by 5.6% this year, including a 33.5% (AR) Q2 drop. Personal consumption expenditures are forecast to improve 4.4% in 2021 after falling 6.4% in 2020. Business fixed investment growth is expected to rise 2.0% and recover just a piece of this year's 10.8% fall. Expected growth of 3.0% in residential investment next year should make up roughly half of this year's decline. Projected government spending growth is expected to hold steady at 1.3%, but increases this year and next are less than the gains during the prior two years. Deterioration in net exports is forecast to continue next year, but at a heightened rate. Slow recoveries abroad are expected to limit the growth in U.S. exports to 4.0% versus a 5.9% rise in imports. This year, exports are projected to decline by 7.9% versus a forecasted fall of 11.4% in imports. The expected rate of inventory investment is expected to pick up next year after moderating in 2020.

Housing starts are forecasted to rise next year to an average 1.26 million units and reverse most of this year's decline. Expected light vehicle sales are projected to rise to 15.2 million units, but remain below the 2016 peak of 17.5 million. The average monthly gain in payroll employment is expected to surge to a post-war record of 497,000 next year as it recovers from a 1.178 million decline this year. Expectations for the unemployment rate in 2020 place it at a record 11.0%, In Q2'20 the jobless rate is expected to peak at 16.4%.

The Consumer Price Index is forecasted to rise at a fairly steady 2.0% (Q4/Q4) in 2021. Price inflation next year, as measured by the PCE price index, is expected to ease to 1.6% from a reduced estimate of 1.7% this year. The chain PCE price index excluding food & energy should rise a lessened 1.5% next year (Q4/Q4), the slowest growth since 2015. The cost of crude oil is expected to average $43 per barrel at the end of 2021, falling below a projected $53 at the end of 2020, less than half its average 10 years earlier.

The forecasted 1.2% interest rate on a ten-year Treasury note at the end of next year compares to 0.80% at the end of 2020. The Federal funds rate is projected to be steady around 0.125% until the end of next year. After-tax corporate profits should rise 11.0% next year after little gain in 2019 and 2020. The expected Federal government budget deficit should double to $2.1 trillion in FY21.

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

National Association For Business Economics 2021 2020 2019 2018 2017
Real GDP (% Chg. SAAR) 3.6 -5.9 2.3 2.9 2.4
  Personal Consumption Expenditures 4.4 -6.4 2.6 3.0 2.6
  Business Fixed Investment 2.0 -10.8 2.1 6.4 4.4
  Residential Investment 3.0 -6.6 -1.5 -1.5 3.5
  Gov't Consumption & Gross Investment 1.3 1.5 2.3 1.7 0.7
  Change in Real Business Inventories (Bil. $) 40.0 -105.0 67.0 48.1 31.7
  Net Exports (Bil. $) -848.0 -742.0 -953.0 -920.0 -849.8
Housing Starts (Mil. Units) 1.26 1.15 1.29 1.25 1.20
Light Vehicle Sales (Mil. Units) 15.2 12.8 17.0 17.2 17.1
Payroll Employment Average Monthly Change (000s) 497 -1,178 178 193 176
Civilian Unemployment Rate (%) 8.1 11.0 3.7 3.9 4.3
Consumer Price Index (Q4/Q4 %) 2.0 0.5 2.0 2.2 2.1
Chain Price Index for PCE (Q4/Q4 %) 1.6 0.5 1.4 1.9 1.8
 Chain Price Index excl. Food & Energy (Q4/Q4 %) 1.5 1.0 1.6 1.9 1.7
Fed Funds Rate (%, Year-End) 0.125 0.125 1.625 2.375 1.375
10-Year Treasury Note (%, Year-End) 1.20 0.80 1.92 2.69 2.40
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