Haver Analytics
Haver Analytics
| Feb 26 2024

NABE Expects GDP Growth Slowdown in 2025

  • Consumer & government spending growth set to moderate next year.
  • Housing activity & vehicle sales projected to improve.
  • Price inflation is forecast to cool.

The National Association for Business Economics expects 1.7% real GDP growth in 2025 compared to 2.3% in 2024. These gains follow 2.5% growth in 2023. Growth from Q4-to-Q4 is expected to pick up to 2.0% next year from 1.5% in 2024. Quarterly GDP growth in 2025 is expected to range from 1.8% in Q1 to 2.1% in Q4, after ranging between 2.0% in Q1’24 and 1.3% in Q3’24.

Growth in personal consumption expenditures is forecast to ease to 1.8% next year from 2.1% in 2024 and 2.2% in 2023. Forecasts for business fixed investment growth of 2.4% in 2025 compare to 2.0% in 2024 and 4.4% last year. An expected 3.1% gain in residential investment in 2025 compares to 2.1% this year and a 10.7% decline in 2023. Government spending growth should ease to 0.9% next year after a 2.3% gain in 2024 and 4.0% growth in 2023.

The net export deficit is expected to deepen to $950.0 billion in 2025 after holding steady in 2024 at $925.5 billion. Exports should rise 3.5% next year and 3.2% this year, after a 2.7% 2023 gain. Imports are projected to rise 2.9% in 2025 after improving 2.1% in 2024 and declining 1.7% in 2023. Inventory accumulation should rise next year to $52.5 billion after falling to $48.0 billion this year. Inventories rose $50.6 in 2023 and $128.1 billion in 2022.

Housing starts are expected to rise slightly in 2025 to 1.46 million after holding roughly steady at 1.41 million in 2024, but they have been trending lower since the 2021 peak of 1.60 million. Light vehicle sales should improve to 16.3 million next year after holding steady at 15.5 million this year. The average monthly gain in payroll employment next year should slow to 129,000 from 142,000 this year and 255,000 in 2023. The expected unemployment rate next year of 4.0% comes after an increase to 3.9% this year from 3.6% in 2023.

Inflation pressures should ease. The CPI is expected to increase 2.2% Q4/Q4 this year after a 2.4% gain in 2024 and a 3.2% increase in 2023. These increases compare to a 7.1% rise in 2022. Price inflation, as measured by the PCE chain price index, is expected to slow to 2.0% next year from 2.1% in 2024, 2.7% in 2023 and 5.9% in 2022. The gain in the chain PCE price index excluding food & energy is projected to slow to 2.1% in 2025 from 2.2% in 2024 and 3.2% in 2023. The index rose 5.1% in 2022. The cost of crude oil of $77 per barrel at the end of next year compares to $76 per barrel at the end of 2024 and $72 per barrel at the end of 2023.

Long-term interest rates are expected to ease. The forecasted 3.70% on ten-year Treasury notes at yearend 2025 compares to 3.82% at the end of this year and 3.88% at the end of 2023. The Fed is expected to end its tightening of monetary policy. The Federal funds rate is forecasted to decline to 3.38% at the end of 2025 from 4.61% at the end of this year and 5.375% at the end of 2023.

After-tax corporate profits are predicted to rise 3.7% next year after increasing 3.5% in 2024. Profits declined 1.0% in 2023. The Federal government budget deficit should widen to $1.781 trillion next year from $1.650 trillion this year. The deficit hit a peak of $3.132 trillion in 2020.

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

  • Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio.   Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984.   He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C.   In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists.   Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.

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