NABE Projects Moderate GDP Growth in 2026 & Slower Inflation
by:Tom Moeller
|in:Economy in Brief
Summary
- Consumer & government spending growth slow next year.
- Business investment & housing pick up.
- Price inflation is forecast to moderate.
The National Association for Business Economics expects 2.0% economic growth next year following 1.9% growth in 2025, revised from 1.8% in the last survey in September. These compare to 2.8% GDP growth in 2024 and 2.9% growth in 2023. Growth from Q4-to-Q4 is expected to improve to 2.0% in 2026 from 1.6% this year. Quarterly GDP growth is expected at 2.0% throughout 2026, after ranging from 1.3% in Q1’25 to 1.8% in Q4’25.
Growth in personal consumption expenditures is forecast to ease to 2.0% next year from 2.4% in 2025, and 2.8% in 2024. The projection for business fixed investment growth of 2.3% in 2026 compares to 1.5% growth in 2025, and a 3.6% rise in 2024. An expected 2.4% gain in residential investment in 2026 compares to 1.1% growth in 2025 and 4.2% in 2024. Government spending growth should ease to 0.8% next year and 1.7% growth in 2025, following 3.4% growth in 2024.
The net export deficit is expected to be little changed at $1.150 trillion in 2026 after widening to $1.118 trillion in 2025 and $1.034 trillion in 2024. Exports should rise 2.0% next year after a 2.3% rise this year and a 5.3% 2024 gain. Imports are projected to rise 1.7% in 2026 after improving 4.0% in 2025, and rising 5.3% in 2024. Inventory accumulation should ease next year to $52.0 billion from $54.0 billion in 2025. It totaled $39.0 billion in 2024.
Housing starts are expected to rise slightly in 2026 to 1.40 million after steadying at 1.37 million this year, down from 1.42 million in 2023. They have been trending lower since the 2021 peak of 1.60 million. Light vehicle sales should improve to 16.2 million next year after being little changed at 16.0 million in 2025. The average monthly gain in payroll employment should improve to 125,000 next year from 115,000 this year, but remain down from 168,000 in 2024. Payrolls increased 216,000 in 2023. The expected unemployment rate next year of 4.3% is unchanged for the 4.3% projection in 2025, and comes after 4.0% last, and 3.6% in 2023.
Inflation pressures are expected to abate. The CPI is forecast to increase 2.5% (Q4/Q4) next year after a 3.0% gain this year, and a 2.7% increase in 2024. 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 2.3% in 2026 from 2.7% in 2025, and stay below the 2.5% rise in 2024. It hit 6.0% in 2022. The gain in the chain PCE price index excluding food & energy is projected to slow to 2.3% in 2026 from 2.8% in both 2025 and 2024. The index rose to its high of 5.2% in 2022. The projected cost of crude oil of $68 per barrel at the end of next year compares to $70 per barrel at the end of 2025 and $70 per barrel at the end of 2024.
Long-term interest rates are expected to ease. The forecast of 4.06% on the 10-year Treasury note at the end of 2026 compares to 4.23% at the end of this year and 4.58% at the end of 2024. The Fed is expected to continue its easing of monetary policy. The Federal funds rate is forecast to decline to 3.38% by the end of 2026 from 3.88% at the end of this year and 4.38% at the end of 2024.
After-tax corporate profits are predicted to rise 3.2% next year after increasing 2.7% in 2025 and 12.1% in 2024. Profits rose 4.0% in 2023. The Federal government budget deficit should widen to $1.979 trillion next year from $1.900 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.
A Tale of Two Outlooks is the title of today’s speech by Fed Governor Christopher J. Waller and it 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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