Global| Dec 03 2018NABE 2019 Forecasts of Moderate Growth and Higher Inflation are Unchanged
by:Tom Moeller
|in:Economy in Brief
Summary
The National Association for Business Economics projects 2.7% growth in real GDP during 2019, unchanged from the prior forecast in June. That follows an expected 2.9% rise this year, revised from the earlier forecast of 2.8% growth. [...]
The National Association for Business Economics projects 2.7% growth in real GDP during 2019, unchanged from the prior forecast in June. That follows an expected 2.9% rise this year, revised from the earlier forecast of 2.8% growth. Quarterly growth is expected to average 2.5% next year following an average 3.1% in 2018. Growth in personal consumption expenditures is forecast to rise an upwardly revised 2.7%, steady with growth this year. Business fixed investment growth of 4.5% should follow a 6.7% advance this year, revised from 5.8%. These are the quickest rates of growth since 2014. Expected growth of 1.4% in residential investment growth was downwardly revised, following little change this year, revised from 3.3%. Government spending growth is projected to remain modest at 2.2%, revised from 1.8%. Deterioration in real net exports is forecast to continue as expected import growth of 4.0% next year outpaces a lessened 2.7% advance in exports. The rate of inventory investment is expected to improve moderately next year, but remain well below the gains from 2012 to 2015.
Housing starts are expected to average a downwardly revised 1.30 million next year, stable with this year's level. Expected light vehicle sales were minimally changed to 16.7 million units in 2019, down from the high of 17.5 million in 2016. Average monthly gains in payroll employment are expected to slow to a little-changed 166,000, down from the 250,000 average in 2014. Expectations for the unemployment rate were lowered to 3.6% from 3.7%, leaving it at the lowest level since 1969.
Consumer price inflation is expected to average a raised 2.4% (Q4/Q4). Price inflation as measured by the PCE price index is expected to average an unrevised 2.1% the same as in 2018 which was unrevised. The chain PCE price index excluding food & energy should rise an upwardly revised 2.2% (Q4/Q4). The cost of crude oil is expected to average $67 per barrel at the end of next year, stable with this year.
The forecasted 3.50% interest rate on 10-year Treasury notes at the end of 2019 was unchanged and compares to an unchanged estimate of 3.20% at the end of this year. The Fed is expected to continue raising the federal funds rate to 3.10% by the end of 2019, revised from 2.88%. Corporate profits after-tax next year should rise a little-changed 4.6% after increased 7.3% growth this year. The expectation for the Federal government budget deficit of $1.005 billion next year was revised up from $987 billion and compares to a $779 billion deficit in 2018, revised from $800 billion.
The figures from the latest NABE report can be found in Haver's SURVEYS database.
Has Inflation Sustainability Reached Target? from the Federal Reserve Bank of San Francisco is available here https://www.frbsf.org/economic-research/files/el2018-26.pdf
| National Association For Business Economics | 2019 | 2018 | 2017 | 2016 | 2015 |
|---|---|---|---|---|---|
| Real GDP (% Chg. SAAR) | 2.7 | 2.9 | 2.2 | 1.6 | 2.9 |
| Personal Consumption Expenditures | 2.7 | 2.7 | 2.5 | 2.7 | 3.7 |
| Business Fixed Investment | 4.5 | 6.7 | 5.3 | 0.5 | 1.8 |
| Residential Investment | 1.4 | 0.1 | 3.3 | 6.5 | 10.1 |
| Gov't Consumption & Gross Investment | 2.2 | 1.8 | -0.1 | 1.4 | 1.9 |
| Change in Real Business Inventories (Bil. $) | 46.1 | 31.0 | 22.5 | 23.4 | 129.0 |
| Real Net Exports (Bil. $) | -968.5 | -906.9 | -858.7 | -786.2 | -724.9 |
| Housing Starts (Mil. Units) | 1.30 | 1.30 | 1.20 | 1.17 | 1.11 |
| Light Vehicle Sales (Mil. Units) | 16.7 | 17.1 | 17.1 | 17.5 | 17.4 |
| Payroll Employment Average Monthly Change (000s) | 166 | 207 | 182 | 195 | 226 |
| Civilian Unemployment Rate (%) | 3.6 | 3.9 | 4.4 | 4.9 | 5.3 |
| Chain Price Index for PCE (Q4/Q4 %) | 2.1 | 2.1 | 1.8 | 1.6 | 0.3 |
| Chain Price Index excl. Food & Energy (Q4/Q4 %) | 2.2 | 2.0 | 1.6 | 1.8 | 1.2 |
| Fed Funds Rate (%, Year-End) | 3.10 | 2.40 | 1.38 | 0.63 | 0.38 |
| 10-Year Treasury Note (%, Year-End) | 3.50 | 3.20 | 2.40 | 2.45 | 2.27 |
ISM Factory Sector Index Improves;
Prices Moderate The ISM composite index of business activity in the factory
sector increased to 59.3 during November after a decline to 57.7 in October. A
reading of 57.5 had been expected in the Action Economics Forecast Survey.
During the last ten years, there has been a 74% correlation between the index
level and q/q growth in real GDP. The rise in the overall index was led by a rebound in the
orders series to 62.1 which reversed the October decline. The production index
also rose moderately to 60.6 and the inventories gained to 52.9 but remained in
the sideways trend of the last year. The supplier delivery series declined to
62.5 and continued to indicate quicker product delivery speeds than during Q3
and Q2. The employment index rebounded to 58.4 after the prior
month's slip and continued the improving trend in factory sector payrolls. A
lessened 23% of respondents reported rising payroll levels while a moderated
eight percent reported a decline. During the last ten years, there has been an
84% correlation between the employment index and the m/m change in factory
sector payrolls. The November index of prices paid fell to 60.7, the lowest
level since June 2017. It was down from the high of 79.5 six months earlier. A
greatly lessened 32% of respondents indicated higher prices while a higher 11%
paid less. Amongst the other ISM series, which are not seasonally
adjusted, the order backlog series was steady at 56.4, down sharply from a
recent high of 63.5 in May. The new export order index held steady at 52.2
following a sharp decline in October. It remained at the lowest level since
November 2016. The capital expenditures index remained strong. The ISM figures are diffusion indexes where a reading above
50 indicates expansion. The figures from the Institute for Supply Management can
be found in Haver's USECON database; further detail is found in the SURVEYS
database. The expectations number is available in Haver's AS1REPNA
database.
by Tom
Moeller December 3,
2018
ISM Mfg (SA)
Nov
Oct
Sep
Nov'17
2017
2016
2015
Headline Index
59.3
57.7
59.8
58.2
57.4
51.4
51.3
New Orders
62.1
57.4
61.8
63.9
62.2
54.5
52.3
Production
60.6
59.9
63.9
64.3
61.0
53.8
59.3
Employment
58.4
56.8
58.8
59.2
56.8
49.2
50.7
Supplier Deliveries
62.5
63.8
61.1
56.6
56.8
51.8
50.8
Inventories
52.9
50.7
53.3
47.1
50.4
47.5
49.4
Prices Paid Index (NSA)
60.7
71.6
66.9
64.8
65.0
53.1
40.1
U.S. Construction Spending Holds Steady
by Tom Moeller December 3, 2018
The value of construction put-in-place was unchanged during September (7.2% y/y) following a 0.8% August rise, initially reported as 0.1%. A 0.2% increase had been expected in the Action Economics Forecast Survey.
In the private sector, activity improved 0.3% (6.1% y/y) after a 0.4% August gain. Residential building activity increased 0.6% (5.1% y/y) following a 0.4% decline. Single-family construction fell 0.8% (+3.1% y/y), down for six months in the last seven. Multi-family construction rebounded 8.7% (8.2% y/y) after a 1.4% drop. Home improvement activity improved 0.1% (7.0% y/y) after a 0.2% rise.
Nonresidential construction in September edged 0.1% higher (7.2% y/y) after a 1.4% jump. The value of commercial building activity declined 1.8% (+4.9% y/y) after a 2.2% increase. Power facility construction fell 1.6% (+9.2% y/y) following a 0.3% improvement. Construction of educational buildings fell 1.5% (+24.7% y/y) after four months of material improvement. Strengthening by 1.6% (-0.2% y/y) was health care building after a 2.2% increase. The value of transportation building strengthened 1.4% (18.9% y/y) after a 1.0% improvement. Factory sector construction increased 1.1% (4.4% y/y) following a 3.0% increase. Office construction rose a steady 0.8% (13.4% y/y).
Construction activity in the public sector decreased 0.9% (+11.0% y/y) in September, third decline in four months. Power facility construction fell s6.1% (-1.1% y/y) as it followed a 2.4% increase. Highway and street building, which accounts for about one-third of nonresidential building, declined 1.1% (+8.6% y/y) following a 0.7% rise. Commercial construction rose 6.2% (21.7% y/y) after two months of sharp decline. Educational building gained 1.2% (9.9% y/y) following a 4.9% surge.
The construction spending figures, some of which date back to 1946 (e.g., public construction figures), are in Haver's USECON database and the expectations figure can be found in the AS1REPNA database.
| Construction Put in Place (SA, %) | Oct | Sep | Aug | Oct Y/Y | 2017 | 2016 | 2015 |
|---|---|---|---|---|---|---|---|
| Total | 0.0 | 0.8 | 7.2 | 4.5 | 7.0 | 10.7 | |
| Private | 0.3 | 0.4 | 6.1 | 7.1 | 9.2 | 12.9 | |
| Residential | 0.6 | -0.4 | 5.1 | 12.4 | 10.7 | 14.2 | |
| Nonresidential | 0.1 | 1.4 | 7.2 | 1.3 | 7.7 | 11.5 | |
| Public | -0.9 | 2.2 | 11.0 | -3.2 | 0.7 | 5.1 |
U.S. Light Vehicle Sales Improve with Rise in Passenger Car Sales
by Tom Moeller December 3, 2018
Sales of light vehicles increased 0.7% (-2.2% y/y) during October to 17.57 million units (SAAR), the highest level since November 2017. The latest gain followed a 4.3% September jump.
Passenger car sales rose 4.8% (-12.8% y/y) last month to 5.67 million units. The rise brought them to the highest level since February. Sales of domestically made cars rose 6.6% (-11.9% y/y) to 4.17 million units and added to a strong September increase. Sales of imported passenger cars rose 0.7% (-15.2% y/y) to 1.50 million units. That gain followed an 8.9% jump during September.
Light truck sales declined 1.1% in October to 11.90 million units. Sales remained up, nevertheless, by 3.9% during the last 12 months. Sales of domestically-produced light trucks fell 1.3% (+0.6% y/y) to 9.50 million units. Sales had been moving steadily upward toward a record high. Sales of imported light trucks improved 0.4% (19.5% y/y) to a new record of 2.41 million units.
Trucks' share of the U.S. vehicle market declined to 67.7% last month, off modestly from August's 69.0% record. This compared to 63.3% during all of last year and 47.3% at the low during all of 2009.
Imports' share of the U.S. vehicle market was little changed last month at 22.2%, but down from 27.6% during all of 2009. Imports' share of the passenger car market fell to 26.5%. Imports share of the light truck market improved to 20.3% which nearly equaled the cycle high. It's up from the low of 12.7% in 2014.
U.S. vehicle sales figures can be found in Haver's USECON database. Additional detail by manufacturer is in the INDUSTRY database.
U.S. Light Weight Vehicle Sales (SAAR, Million Units)
Tom Moeller
AuthorMore in Author Profile »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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