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Economy in Brief

NABE Expects GDP Growth & Inflation Moderation in 2023
by Tom Moeller  February 28, 2022

• Consumer spending & employment growth slow.

• Housing starts ease but vehicle sales pick up.

• Price inflation moderates yet interest rates rise.

The National Association for Business Economics expects the economic expansion to continue through its third year. The first estimate of real GDP in 2023 calls for 2.3% growth (Q4/Q4) following a 3.0% forecasted advance in 2022, which was revised from a December projection of 3.6% growth. GDP is expected to rise 1.8% this quarter then between 2.7% and 4.0% quarterly through the rest of 2022. Personal consumption expenditures are forecast to grow 2.5% in 2023 following an unrevised 3.5% projection in 2022. Business fixed investment is expected to rise 4.5% next year after a little-changed 5.5% estimated advance in 2022. Expected growth of 2.0% in residential investment should follow a little changed 0.8% growth in 2022. Government spending growth is expected to improve 1.5% n 2023 after 0.6% growth in 2022, revised from 1.8%. The net export deficit is expected to be unchanged in 2023. U.S. export growth is expected to ease to 5.7% following an accelerated 8.2% advance in 2022. Import growth should slow to 3.8% from 7.2% in 2022. Accumulation of inventories is expected to slow to $108 billion from $115 billion in 2022, which follows two consecutive years of decumulation. Modest government spending growth is expected for the third straight year in 2023.

Housing starts are forecasted to decline to an average 1.57 million units in 2023 after rising to an estimated 1.64 million in 2022, revised from 1.59 million units. Light vehicle sales are projected to increase to 16.8 million this year after rising to 15.7 million in 2022, revised from 16.0 million units. Sales will thus remain below the 2016 peak of 17.5 million. An average monthly gain in payroll employment of 172,000 next year is expected to follow 317,000 growth this year, revised from 337,000 in 2022. Expectations for the unemployment rate place it at 3.5% next year after falling to 3.7% in 2022, revised from 4.0% projected in December.

Inflation pressures should ease. The Consumer Price Index is projected to rise 2.4% in 2023 Q4/Q4 after a 3.6% 2022 advance, revised from 2.8% this year. Price inflation next year, as measured by the PCE price index, is expected to slow to 2.3% (Q4/Q4) after a 3.2% gain in 2022, revised from 2.6%. The chain PCE price index excluding food & energy should rise 2.2% next year following 3.2% growth in 2022, revised from a 2.6% expected earlier. The cost of crude oil is expected to average $72 per barrel at the end of 2023 after little change this year at $78 per barrel.

Interest rates are now expected to rise. The forecasted 2.70% interest rate on a ten-year Treasury note at the end of 2023 compares to an expected 2.30% at the end of this year, compared to 2.10% expected earlier. The Federal funds rate is projected to rise to 1.875% at the end of 2023 after rising to 1.124% at the end of 2022, revised from 0.375% expected earlier. After-tax corporate profits should rise 3.3% in 2023 after strengthening 4.0% in 2022, revised from 3.0% expected earlier. Both gains are down from the post-recession jump of 23.2% in 2021. The expected Federal government budget deficit should ease to $993 billion after falling to $1.3 trillion in trillion in FY22. The deficit hit a peak of $3.129 trillion in 2020.

This latest survey was conducted between February 7-15 2022. The figures from the latest NABE report can be found in Haver's SURVEYS database.

National Association For Business Economics 2023 2022 2021 2020 2019
Real GDP (Q4/Q4 %) 2.3 3.0 4.9 -2.3 2.6
Real GDP (% Change) 2.6 3.7 5.5 -3.4 2.3
  Personal Consumption Expenditures 2.5 3.5 7.9 -3.8 2.2
  Business Fixed Investment 4.5 5.5 7.6 -5.3 4.3
  Residential Investment 2.0 0.8 9.1 6.8 -0.9
  Gov't Consumption & Gross Investment 1.5 0.6 0.7 2.5 2.2
  Change in Real Business Inventories (Bil. $) 108.0 115.0 -80.0 -42.3 75.1
  Net Exports (Bil. $) -1,344 -1,344 -1,273 -942.7 -905.3
Housing Starts (Mil. Units) 1.57 1.64 1.58 1.38 1.29
Light Vehicle Sales (Mil. Units) 16.8 15.7 15.2 14.5 17.0
Payroll Employment Average Monthly Change (000s) 172 317 564 -774 164
Civilian Unemployment Rate (%) 3.5 3.7 5.4 8.1 3.7
Consumer Price Index (Q4/Q4 %) 2.4 3.6 6.0 1.2 2.0
Chain Price Index for PCE (Q4/Q4 %) 2.3 3.2 4.9 1.2 1.5
  Chain Price Index excl. Food & Energy (Q4/Q4 %) 2.2 3.2 4.1 1.4 1.6
Fed Funds Rate (%, Year-End) 1.875 1.125 0.125 0.125 1.625
10-Year Treasury Note (%, Year-End) 2.70 2.30 1.60 0.93 1.92
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