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Economy in Brief

NABE 2018 Forecast Unchanged; Moderate GDP Growth & Stronger Price Inflation
by Tom Moeller  September 25, 2017

The National Association for Business Economics expects 2.4% real U.S. economic growth in 2018, the same as expected in the last tally. This follows an unchanged expectation for 2.2% growth this year. Quarterly GDP growth is expected to range between 2.2% and 2.8% through next year. Growth in personal consumption expenditures is forecast to remain fairly steady at 2.6%. Expected growth in business fixed investment of 4.0% is the quickest rate of growth since 2014. Residential investment growth also is expected to improve to 3.2% next year, revised down from a reduced expected advance of 2.4% in 2017. Government spending growth is projected to improve slightly to 1.0%, the quickest increase since 2015. Deterioration in real net exports is forecast to continue as expected import growth of 4.3% outpaces a 3.7% advance in exports. The rate of inventory investment is expected to improve slightly next year, but remain below the gains from 2012 to 2015.

Housing starts are expected to average 1.30 million next year, revised down but still the strongest level since 2007. Expected light vehicle sales of 16.9 million units in 2018 were revised lower. Average monthly gains in payroll employment are expected to slow to an unchanged 159,000 next year, down from the 250,000 average in 2014. Expectations for the unemployment rate of 4.2% next year were reduced from 4.3%, and would leave it at the lowest level since 2000.

Consumer price inflation is expected to average 2.1% during 2018 following a 1.7% rise this year. The chain PCE price index should rise 1.9% from the beginning of next year to the end of 2018, slightly lower than expected earlier, but still the strongest gain since 2011. The index less food & energy is expected to rise 1.9% next year, still up from 1.0% growth in 2010. The cost of crude oil is expected to average $51 per barrel at the end of next year, up from $53 this coming December. These estimates were little-changed.

The forecasted 3.00% interest rate on 10-year Treasury notes at the end of 2018 was reduced from the earlier forecast of 3.10%, and follows a lowered 2.50% estimate at the end of this year. The Fed is expected to continue raising the federal funds rate to 2.13% by the end of 2018, unchanged from estimated earlier. Corporate profits after tax next year should rise a slightly reduced 4.5% after a 5.0% gain this year. The expectation for the Federal government budget deficit was raised  to $666 billion in 2018.

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

National Association For Business Economics 2018 2017 2016 2015
Real GDP (% Chg. SAAR) 2.4 2.2 1.5 2.9
  Personal Consumption Expenditures 2.6 2.7 2.7 3.6
  Business Fixed Investment 4.0 4.4 -0.6 2.3
  Residential Investment 3.2 2.4 5.5 10.2
  Gov't Consumption & Gross Investment 1.0 0.1 0.8 1.4
  Change in Real Business Inventories (Bil. $) 35.0 17.0 33.4 100.5
  Real Net Exports (Bil. $) -652.1 -619.8 -586.3 -545.3
Housing Starts (Mil. Units) 1.30 1.20 1.17 1.11
Light Vehicle Sales (Mil. Units) 16.9 16.9 17.5 17.4
Payroll Employment Average Monthly Change (000s) 159 178 187 226
Civilian Unemployment Rate (%) 4.2 4.4 4.9 5.3
Consumer Price Index (Q4/Q4 %) 2.1 1.7 1.8 0.4
Fed Funds Rate (%, Year-End) 2.13 1.40 0.63 0.38
10-Year Treasury Note (%, Year-End) 3.00 2.50 2.45 2.27
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