NABE Lowers Real Growth and Inflation Forecasts

The National Association for Business Economics forecast of 2.7% growth in U.S. real economic activity in 2016 was revised from 2.9% posted in June. Expected growth of 2.5% this year, however, was little-changed. Quarterly GDP growth is expected to range between 2.5% and 2.8%. Forecasted growth in personal consumption expenditures was unchanged at 2.9% next year following a 3.0% rise this year. These remain the strongest yearly gains since 2006. Growth expectations for business investment in equipment in 2016 were lowered to 5.0% from 5.7%. Expected growth in spending on nonresidential structures also was lessened to 4.3% following this year's slight decline. The rate of inventory investment should ease next year by more-than-expected earlier after firming this year and last. Real net exports are expected to deteriorate more than previously expected, producing a slightly larger drag on U.S. GDP growth in 2016. Forecasted improvement next year of 8.1% in residential investment was little-changed. It thus should continue to be the economy's strongest sector following an unchanged 8.5% rise this year.

Forecasts for housing starts remained unchanged for growth to 1.28 million in 2016 following a slightly raised expectation for 1.12 million starts this year. Expectations for light vehicle sales were nudged up to 17.1 million units next year, a fifteen year high, unchanged from a raised 17.1 million in 2015. Average monthly gains in payroll employment are expected to remain steady at 211,000, raised slightly from the prior estimate. Expectations for the unemployment rate were lowered to an average 4.9% in 2016 following a lessened 5.3% this year. Consumer price inflation is expected to average a slightly lessened 2.0%, the quickest rate of increase since 2011, after an unchanged forecast for a 0.3% rise this year.

The forecasted 3.00% interest rate on 10-year Treasury notes at the end of next year follows 2.40% at the end of this year. Both figures were reduced slightly from earlier expectations. The Fed is expected to begin raising interest rates this quarter, later than the earlier expectation. Corporate profits next year should rise an unrevised 4.7% following a raised forecast of 4.0% growth this year. The Federal government budget deficit is expected to shrink to $430 billion in 2016, a lower figure versus the earlier expectation and roughly one-third its $1.4 trillion peak in 2009.

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

U.S. Economy and Monetary Policy is the title of Fed Vice Chairman Stanley Fischer's speech and it can be found here.