Underlying Economy Improving: While Economists Remain Measured on Expectations for Overall Economic Growth, Uncertainty Is Diminishing

The February 2012 NABE Outlook presents the consensus of macroeconomic forecasts from a panel of 45 professional forecasters. (See last page for listing.) The survey, covering the outlook for 2012 and 2013, was conducted January 26- February 8, 2012. The NABE Outlook originated in 1965 and is one of three surveys conducted by NABE; the others are the NABE Industry Conditions Survey and the NABE Economic Policy Survey. Founded in 1959, the National Association for Business Economics is the professional association for those who use economics in their work. NABE has 2,400 members and 33 chapters nationwide. Shawn DuBravac, Consumer Electronics Association; Richard DeKaser, The Parthenon Group; Cecilia Hermansson, Swedbank; Patrick Newport, IHS Global Insight; Sean Snaith, University of Central Florida; William Strauss, Federal Reserve Bank of Chicago; Richard Wobbekind, University of Colorado; and Clare Zempel, Zempel Strategic, conducted the analysis for this report. The views expressed in this report are those of the analysts and do not necessarily represent the views of their affiliated companies or institutions. This report may be reprinted in whole or in part with a proper citation to NABE.

Summary: “Economists responding to the latest NABE Outlook Survey are seeing strength in a number of economic measures and have subsequently increased their expectations for employment, housing starts, and business spending,” said NABE President Gene Huang, chief economist at FedEx. “Despite increases in a number of forecasts, however, economists remain guarded on US economic growth, with the median forecast of respondents calling for inflationadjusted gross domestic product—real GDP—of 2.4 percent for the year in 2012. Respondents continue to expect consumer spending to grow below trend in 2012 and the federal deficit to increase before it eventually declines. Economists’ expectations for export growth have also weakened over the last four months. Collectively, forecast uncertainty among the economists appears to have diminished slightly over the last several months.”

Highlights

• The NABE Outlook Panel of 45 forecasters continues to predict moderate real GDP growth through 2012. Economists expect the economy to grow 2.4 percent in 2012, with GDP growth slightly stronger in the second half of the year than in the first.
• Employment growth brightens. Panelists increased their anticipated average monthly job change to 170,000 in 2012, which would result in an average annual unemployment rate of 8.3 percent. NABE forecasters expect stronger job growth in 2013 with the unemployment rate falling an additional half percentage point to 7.8 percent.
• Consumer spending to remain subdued. Even with higher employment forecasts, real consumer spending is forecast to increase only 2.1 percent this year and 2.3 percent in 2013. This rate remains below the historical norm of 2.8 percent and is consistent with a positive but below-trend recovery. Light vehicle sales are anticipated to grow at a solid pace of 14 million units this year and 14.6 million units in 2013, up from 12.7 million units in 2011.
• Housing starts are expected to increase 19 percent in 2012. The economists surveyed expect housing starts to reach 700,000 units in 2012, up from 610,000 in 2011 and an upward revision from the November forecast. The forecast for 2013 shows continued improvement, with housing starts reaching 850,000 units. Correspondingly, real residential investment is forecast to increase 6.6 percent in 2012, slightly higher than the 4.3 percent predicted in November, and then strengthen further, rising 10 percent in 2013. The projection for home prices in 2012 was lowered slightly from a projected increase in the FHFA index of 0.9 percent (Q4/Q4) in the November survey to home prices remaining unchanged in the February survey. In 2013 home prices are expected to increase slightly more than 2 percent.
• Panelists continue to forecast strong business spending growth. The outlook for spending on real nonresidential equipment and software in 2012 was marginally revised upward to 8.1 percent, and panelists forecast a lower but still solid 7.3 percent in 2013. The projection for real spending on nonresidential structures for 2012 was lowered slightly from that in the November survey, to 4.2 percent, but in 2013 the growth rate is expected to pick up to 5.1 percent. Industrial production is expected to increase moderately at 3.5 percent in 2012 and at 3.3 percent in 2013.

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Embargoed until: Monday,February 27, 2012,12:01 AM ET

The November 2011 NABE Outlook presents the consensus of macroeconomic forecasts from a panel of 49 professional forecasters. (See last page for listing.) The survey, covering the outlook for 2011 and 2012, was conducted October 20- November 2.The NABE Outlook originated in 1965 and is one of three surveys conducted by NABE; the others are the NABE Industry Conditions Survey and the NABE Economic Policy Survey. Founded in 1959, the National Association for Business Economics is the professional association for those who use economics in their work. NABE has 2,400 members and 32 chapters nationwide. Richard DeKaser, The Parthenon Group; Cecilia Hermansson, Swedbank; Patrick Newport, IHS Global Insight; Sean Snaith, University of Central Florida; William Strauss, Federal Reserve Bank of Chicago; Richard Wobbekind, University of Colorado; and Clare Zempel, Zempel Strategic conducted the analysis for this report. The views expressed in this report are those of the analysts and do not necessarily represent the views of their affiliated companies or institutions. This report may be reprinted in whole or in part with a proper citation to NABE.