NABE Forecasts Slower Economic Growth and Price Inflation in 2025
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 cool further in 2025, after slowing this year.
The National Association for Business Economics expects 1.8% growth in real GDP in 2025, unchanged from the last forecast. These compare to 2.6% growth in 2024 and 2.9% growth in 2023. Growth from Q4-to-Q4 is expected to ease to an unrevised 1.8% next year from 2.0% in 2024, revised from 1.7%. Quarterly GDP growth in 2025 is expected to range from 1.6% in Q1 to 2.0% in Q4.
Growth in personal consumption expenditures is forecast to ease to a minimally-changed 2.0% next year from an unrevised 2.4% in 2024. The forecast for business fixed investment growth of 2.8% in 2025 was raised from 2.6% and compares to 3.8% growth in 2024, revised from 2.8%. An expected 1.4% gain in residential investment in 2025, revised from 3.1%, compares to 3.9% growth this year, revised from 4.2% and an 8.3% decline in 2023. Government spending growth should ease to 1.2% next year, revised from 1.0% and 3.0% growth in 2024, revised from 2.5% following 3.9% growth in 2023.
The net export deficit is expected to deepen to $1.048 trillion in 2025, revised from $1.015 trillion, after widening to a raised estimate of $1.006 trillion in 2024. Exports should rise a lessened 3.1% next year and an unchanged 2.3% this year, after a 2.8% 2023 gain. Imports are projected to rise 3.0%, revised from 2.6% in 2025 after improving 4.0% in 2024, revised from 3.2%, and declining 1.2% in 2023. Inventory accumulation should rise next year to $59.5 billion, revised from $56 billion after rising $56 billion this year, revised from $45 billion. Inventories rose $33.1 billion in 2023 and $119.1 billion in 2022.
Housing starts are expected to rise slightly in 2025 to 1.40 million, revised from 1.47 million after falling to 1.35 million this year, revised from 1.42 million in 2024. They have been trending lower since the 2021 peak of 1.60 million. Light vehicle sales should improve to 16.0 million, revised from 16.2 million next year after rising to 15.5 million this year, revised from 15.7 million, this year. The average monthly gain in payroll employment should slow to 128,000 next year, revised from 139,000 after rising 167,000 this year, revised from the earlier expectation of a 184,000 rise. Payrolls increased 251,000 in 2023. The expected unemployment rate next year of 4.4%, compares to 4.1% expected earlier, and comes after a slightly raised 4.1% this year, and from 3.6% in 2023.
Inflation pressures should continue to abate. The CPI is expected to increase a minimally-revised 2.4% (Q4/Q4) next year after a 2.6% gain this year, revised from 3.0%, 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 an unchanged 2.1% next year, 2.4% in 2024, revised from 2.6%, 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 minimally-changed 2.1% in 2025 from 2.7% in 2024 and 3.2% in 2023. The index rose 5.2% in 2022. The projected cost of crude oil of $75 per barrel at the end of next year compares to a lessened estimate of $75 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 3.6% on the 10-year Treasury note at the end of 2025 compares to 3.90% expected earlier, 3.75% at the end of this year, revised from 4.20%, 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 3.38%, revised from 3.88%, by the end of 2025 from 4.38%, revised from 4.88% at the end of this year and 5.375% at the end of 2023.
After-tax corporate profits are predicted to rise a little-changed 3.0% next year after increasing a strengthened 5.7% in 2024. Profits rose 4.0% in 2023. The Federal government budget deficit should widen to $1.809 trillion next year, revised from the earlier estimate of $1.732, and from a raised estimate of $1.761 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.
Today’s speech on the Economic Outlook by Federal Reserve Chair Jerome H. Powell can be found here.
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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