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NABE: GDP to improve in 2015

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NABE:  GDP to improve in 2015

Business economists expect 3.1% growth this year.

While recent economic news has been worrisome for many, the nation’s business economists are expecting reasonably solid growth in the coming year and 2106.

According to a survey of economists undertaken by the National Association for Business Economics, GDP growth in 2015 should rise to 3.1% in 2015, while falling slightly to 2.9% in 2016. GDP growth in 2014 was 2.4%.

"The outlook for the labor market is notably stronger."

“NABE’s March 2015 Outlook Survey panel expects a markedly stronger pace of economic growth in 2015 and 2016 than was recorded last year,” said NABE President John Silvia, chief economist of Wells Fargo. “Healthier consumer spending, housing investment, and government spending growth are expected to make outsized contributions to the projected acceleration in overall economic activity.

“Accordingly, recent labor market strength is expected to continue. The panelists’ median forecast is for net new job creation to average approximately 250,000 per month in 2015 and 216,000 per month next year. The unemployment rate is expected to continue its downward trend over the next several quarters, reaching 5% by the second half of 2016.”

Inflation to remain muted

The survey indicated that most economists expect inflation to remain low in light of continued low oil prices and the strength of the US dollar.

“Panelists in March have revised their inflation projections for 2015 further downward amid a surging U.S. dollar and plunging oil prices,” according to NABE Outlook Survey Chair Timothy Gill, deputy chief economist of the National Electrical Manufacturers Association. “The panel’s median forecast for the consumer price index is for a gain of less than 1% on an annual average basis while its median forecast for the core personal consumption expenditures deflator is for an increase of only 1.4% on a Q4/Q4 basis. The panel’s consensus calls for consumer price inflation to accelerate in 2016 as oil prices rebound and greenback appreciation slows.”

“Against this backdrop, 88% of panelists believe the Federal Reserve will commence tightening of monetary policy in the second or third quarter of 2015,” adds Silvia. “Fifty-five percent expect a third quarter ‘liftoff’—up from the 46% who held this view in the December Outlook survey. The federal funds rate is forecasted to reach 0.75% by the end of the year—identical to expectations in December—and 2% by the end of 2016. Forecasts for both years are similar to the median assessment of members of the Federal Open Market Committee (FOMC) communicated in March.”

Other highlights from the survey

  • The outlook for the labor market is notably stronger. The median forecast for nonfarm payroll growth is 251,000 for 2015—a substantial upgrade from December’s forecast of 217,000—and 216,000 for 2016. The outlook for unemployment has also brightened: in December the 2015 unemployment rate was expected to average 5.6%; the current median forecast is 5.4%. The median forecast for 2016 is for unemployment to decline further to an average rate of just 5.1%.
  • The panel’s view continues to coalesce around a mid-2015 start for Federal Reserve interest rate hikes. Eighty-eight percent of panelists expect a Fed “liftoff” in the second or third quarter of 2015—up from the 76% who held this view in December and the 69% in September. A majority of panelists—55%—now expect the next rate increase in the third quarter of 2015 while 33% expect it in the second quarter of this year. Smaller shares of the panel look for a rate hike in the fourth quarter of 2015 (2%), in 2016 (8%) and in 2017 or later (2%). (Note: The survey was conducted prior to the March meeting of the FOMC.) 

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