NABE Economic Forecasts for 2023 & 2024 Are Little Changed

The National Association for Business Economics is forecasting real GDP growth in 2023 & 2024 of 0.4% (Q4/Q4) and 1.8%, compared to 0.3% and 1.9% estimated earlier. These gains follow a 0.9% rise in 2022. Quarterly GDP in 2023 is expected to rise a marginally changed 0.6% in Q2, then 0.1% in Q3 and 0.5% in Q4. Growth of 1.3% in Q1 2024 was little changed.

Personal consumption expenditures are forecast to grow a little-changed 1.6% (Q4/Q4) this year and 1.2% in 2024, after a 2.7% gain in 2022. Forecasts for business fixed investment growth of 1.5% this year and 0.7% in 2024 also were little revised and follow a 3.9% rise in 2022. An expected decline in residential investment this year of 12.7%, revised from -14.2%, should be followed by a 1.3% rise in 2024, revised from 1.8%; all coming after a 10.6% decline in 2022. After falling 0.6% in 2022, government spending should rise an increased 2.3% in 2023 then rise 1.0% in 2024.

The net export deficit is expected to shrink from the record $1.357 in 2022 to a smaller $1.225 trillion in 2023 and $1.213 trillion in 2024. Exports should rise a little-changed 3.6% this year, then gain 3.0% in 2024. Imports are expected to decline a little-revised 0.7% this year, then rise 1.3% next year, revised from 2.9%. Following $125 accumulation in 2022, inventories are expected to increase $22 billion in 2023, revised from $37 billion expected earlier, then $35 billion in 2024, revised from $40 billion.

Housing starts are forecasted to decline to a marginally changed 1.32 million in 2023 from 1.55 million in 2022, then rise to a little-changed 1.36 million units in 2024. Light vehicle sales are projected to rise to a slightly changed 14.9 million this year from 13.8 million in 2022, then improve to an unchanged estimate of 15.5 million in 2024. Sales will remain below the 2016 peak of 17.5 million. An average monthly gain in payroll employment of 125,000 in 2023 is double the earlier forecast, and compares to 399,000 in 2022. The payroll gain should then slow to 87,000 per month in 2024, revised from 102,000. Expectations for the unemployment rate place it at 3.7% this year, revised from 3.9%, compared to 3.6% in 2022; then it is expected to rise further to 4.4% in 2024.

Inflation pressures should ease. After rising 7.1% (Q4/Q4) in 2022, the gain in the Consumer Price Index should moderate to 3.3% (Q4/Q4) in 2023, revised from 3.0%, then ease further to 2.3% in 2024. Price inflation, as measured by the PCE price index, is expected to slow to 3.1%, revised from 2.8%, in 2023 and an unchanged 2.2% in 2024, after surging to 5.7% in 2022. After rising 4.8% in 2022, the gain in the chain PCE price index excluding food & energy is projected to slow to 3.6%, revised from 3.0%, in 2023 and a little-changed 2.2% in 2024. The cost of crude oil is expected to be $76 per barrel, revised from $79, at the end of this year and be a marginally changed $78 per barrel by the end of 2024.

Interest rates are expected to decline. The forecasted 3.50% on ten-year Treasury notes at yearend 2023 compares to 3.55% forecasted earlier and it compares to 3.88% at the end of 2022. The rate should decline further to 3.40% by the end of 2024, revised from 3.42%. The Federal funds rate is projected to rise, however, to 5.13%, revised from 4.88%, by the end of 2023 from 4.375% at the end of 2022. The funds rate is forecasted to decline to 3.58% at the end of 2024, revised from 3.50%.

After-tax corporate profits are predicted to decline 2.1%, revised from -1.6%, this year after rising a downwardly revised 4.4% in 2022. Profits should improve 1.7% next year. The expected Federal government budget deficit should be little changed at $1.354 trillion this year, revised from $1.185 trillion, then rise to $1.504 trillion in 2024, revised $1.250 trillion in 2024. 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.