NABE Forecast of Slower Growth in 2025 is Little Changed
by:Tom Moeller
|in:Economy in Brief
Summary
- Consumer & government spending growth should moderate next year.
- Housing activity & vehicle sales are projected to improve.
- Price inflation is forecast to decline in 2025 after slowing this year.
The National Association for Business Economics expects 1.8% growth in real GDP in 2025, revised from its earlier forecast of 1.7% growth in February 2024. These compare to 2.4% growth in 2024 (revised from 2.3%) and actual growth of 2.5% in 2023. Growth from Q4-to-Q4 is expected to pick up to an unrevised 2.0% next year from 1.7% in 2024, revised from 1.5%. Quarterly GDP growth in 2025 is expected to range from 1.8% in Q1 to 2.0% in Q4.
Growth in personal consumption expenditures is forecast to ease to a little-changed 1.9% next year from 2.4% in 2024, revised from 2.1%, and 2.2% in 2023. The forecast for business fixed investment growth of 2.6% in 2025 was raised from 2.4% in 2025 and compares to 2.8% in 2024, revised from 2.0% and 4.5% last year. An expected 3.1% gain in residential investment in 2025 was unchanged and compares to 4.2% growth this year, compared to 2.1% forecast earlier, and a 10.6% decline in 2023. Government spending growth should ease to little-changed estimates of 1.0% next year and 2.5% in 2024, following 4.1% growth in 2023.
The net export deficit is expected to deepen to $1.015 trillion in 2025, revised from $950.0 billion, after widening to a raised estimate of $982.0 billion in 2024. Exports should rise an unchanged 3.4% next year and a lessened 2.3% this year, after a 2.6% 2023 gain. Imports are projected to rise 2.6% in 2025 after improving 3.2% in 2024, revised from 2.1% and declining 1.7% in 2023. Inventory accumulation should rise next year to a little-changed estimate of $56 billion after holding steady at $45 billion this year. Inventories rose $43.7 billion in 2023 and $128.1 billion in 2022.
Housing starts are expected to rise slightly in 2025 to a minimally changed 1.47 million after holding steady at a slightly changed estimate of 1.42 million in 2024. They have been trending lower since the 2021 peak of 1.60 million. Light vehicle sales should improve to 16.2 million (revised little) next year after rising to 15.7 million, revised from 15.5 million, this year. The average monthly gain in payroll employment next year should slow to 139,000 next year, revised from 129,000. Payrolls should rise 184,000 in 2024, revised from the earlier expectation of 142,000. They increased 251,000 in 2023. The expected unemployment rate next year of 4.1% compares to 4.0% expected earlier, and comes after an unchanged estimate of 3.9% this year, and from 3.6% in 2023.
Inflation pressures should decline. The CPI is expected to increase a minimally-revised 2.3% (Q4/Q4) this year after a 3.0% 2024 gain, revised from 2.4%, 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 a minimally changed 2.1% next year, 2.6% in 2024, revised from 2.1%, and 2.8% in 2023. It hit 5.9% in 2022. The gain in the chain PCE price index excluding food & energy is projected to slow to a little-changed 2.2% in 2025, 2.7% in 2024, revised from 2.2%, and 3.2% in 2023. The index rose 5.1% in 2022. The projected cost of crude oil of $76 per barrel at the end of next year compares to $79 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 forecast of 3.90% on the 10-year Treasury note at the end of 2025 compares to 3.70% expected earlier, 4.20% at the end of 2024, revised from 3.82%, 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 3.88% at the end of 2025, (revised from 3.38%) from 4.88% at the end of this year (revised from 4.61%) and 5.375% at the end of 2023.
After-tax corporate profits are predicted to rise a little-changed 3.1% next year after increasing 4.8% in 2024. Profits declined 0.2% in 2023. The Federal government budget deficit should widen to $1.732 trillion next year, revised from the earlier estimate of $1.781, from a little-changed estimate of $1.600 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.
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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