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Economy in Brief

NABE Expects Moderate 2017 Economic Growth, but Lowers 2016 Estimate Again
by Tom Moeller  June 6, 2016

The National Association for Business Economics projects 2.3% real U.S. economic growth next year, little changed from its last estimate of 2.4% growth. This year's estimate was reduced, however, to 1.8% from 2.2%, and from 2.6% projected in December. The gains follow a 2.4% rise in both 2015 and 2014. Quarterly GDP growth is expected to range between 2.2% and 2.5%. Growth in personal consumption expenditures is expected to moderate to 2.5% next year following a lessened 2.6% in 2016 and 3.1% in 2015. Nevertheless, these remain the strongest yearly gains since 2006. Real net exports are expected to deteriorate next year, producing another drag on U.S. GDP growth as import growth of 5.0% outpaces the 3.5% gain in exports. The rate of inventory investment is expected to ease to the slowest since 2011. Growth of 7.4% next year in residential investment compares to 9.6% in 2016, continuing to be the economy's strongest sector.

Housing starts are expected to average 1.36 million after a slightly lowered 2016 estimate of 1.21 million. Expected light vehicle sales of 17.3 million units next year followed a lowered estimate of 17.3 million this year. Average monthly gains in payroll employment are expected to ease to 192,000 from 201,000 in 2016, both of which were raised slightly. Expectations for the unemployment rate of 4.7% next year compared to a raised estimate of 4.8% in 2016. Consumer price inflation is expected to average 2.2% next year, the quickest rate of increase since 2011. The core PCE price index should rise 1.9% next year, unrevised from the previous expectation and the strongest gain since 2011.

The forecasted 2.73% interest rate on 10-year Treasury notes at the end of next year was reduced from 3.07%, and follows a lessened 2.25% estimate at the end of this year. The Fed is expected to continue raising the federal funds rate to a lessened 1.63% by the end of next year. Corporate profits next year should rise 3.9% following a reduced 2.0% decline forecasted this year. The Federal government budget deficit is expected to be $542 billion in 2017, 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.

Current Conditions and the Outlook for the U.S. Economy is the title of today's speech by Janet L. Yellen here.

National Association For Business Economics 2017 2016 2015 2014
Real GDP (% Chg. SAAR) 2.3 1.8 2.4 2.4
  Personal Consumption Expenditures 2.5 2.6 3.1 2.7
  Nonresidential Structures -- 4.0 -1.5 8.1
  Nonresidential Equipment -- 4.9 3.1 5.8
  Residential Investment 7.4 9.6 8.9 1.8
  Change in Real Business Inventories (Bil. $) 55.6 54.5 97.5 68.0
  Real Net Exports (Bil. $) -625.5 -582.6 -543.4 -442.5
Housing Starts (Mil. Units) 1.36 1.21 1.11 1.00
Light Vehicle Sales (Mil. Units) 17.3 17.3 17.4 16.4
Payroll Employment Average Monthly Change (000s) 192 201 229 251
Unemployment Rate (%) 4.7 4.8 5.3 6.2
Consumer Price Index (Y/Y %) 2.2 1.3 0.1 1.6
Fed Funds Rate (%, Year-End) 1.63 0.87 0.38 0.13
10-Year Treasury Note (%, Year-End) 2.73 2.25 2.27 2.17
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