NABE Outlook Survey - June 2018


NABE Panel Sees Economy Continuing to Perform Well in 2018; Some Risks to the Outlook for 2019

The June 2018 NABE Outlook presents the consensus macroeconomic forecast of a panel of 45 professional forecasters (see last page for listing). The survey, covering the outlook for 2018 and 2019, was conducted between May 9 and May 16, 2018. The NABE Outlook Survey originated in 1965, and is one of three surveys conducted by the National Association for Business Economics (NABE); the others are the NABE Business 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 over 2,600 members and 40 chapters nationwide. David Altig, Federal Reserve Bank of Atlanta, Survey Chair; Chris Christopher, CBE, IHS Markit; Steve Cochrane, CBE, Moody’s Analytics; Jack Kleinhenz, CBE, National Retail Federation; Chad Moutray, CBE, National Association of Manufacturers; Yelena Shulyatyeva, Bloomberg LP; Kevin Swift, CBE, American Chemistry Council; and Richard Wobbekind, CBE, Leeds School of Business, University of Colorado/Boulder, conducted the analysis of survey responses for this report. The views expressed in this report are those of the panelists, and do not necessarily represent the views of their affiliated companies or institutions. This report may be reproduced in whole or in part with appropriate citation to NABE.


SUMMARY: “NABE Outlook Survey panelists are slightly less optimistic about the U.S. economy in 2018 than they were three months ago,” said NABE Vice President Kevin Swift, CBE, chief economist, American Chemistry Council. “However, they are much more positive about the prospects for industrial production—anticipating 3.8% average growth in 2018, up from the 3.3% gain forecasted in March, and up significantly from the 2.3% forecasted in the December survey. The panel’s median forecast for average annual real gross domestic product (GDP) growth in 2018 is 2.8%, off the 2.9% expected in the previous survey, but still an increase from the 2.5% anticipated in the December survey. Note that 57% of panelists believe that 2018 risks to real GDP growth are weighted to the downside, and nearly 71% believe the risks to inflation are weighted to the upside.”

“In large part, the growth prospects appear to be related to federal fiscal policies,” added NABE Survey Analyst, Steven Cochrane, CBE, managing director, Moody’s Analytics. “The median estimate of the impact on real GDP growth resulting from fiscal policy changes is an increase of 0.4 percentage points in 2018 and 0.3 percentage points in 2019, but nearly 76% of respondents believe that current trade policies will have a negative effect. The panelists’ views about the onset of the next recession are mixed, with 82% believing it will start after 2019.”

“The outlook for inflation remains modest but expectations are rising,” continued NABE Survey Analyst Yelena Shulyatyeva, senior U.S. economist, Bloomberg LP. “Overall, panelists expect that inflation, as measured by the personal consumption expenditures (PCE) price index, will increase 2.1% from the fourth quarter of 2017 to the fourth quarter of 2018, up from the 1.9% expected in the previous survey. The Q4/Q4 median inflation forecast for 2019 is also higher, at 2.1%.” 



The median forecast for growth in inflation-adjusted gross domestic product (real GDP) from the fourth quarter (Q4) of 2017 to Q4 2018 is 2.8%. The median forecast for real GDP growth from Q4 2018 to Q4 2019 calls for a moderation to 2.5%—unchanged from the March 2018 NABE Outlook Survey. Overall, the panel continues to expect economic growth in 2018 to be stronger than the actual 2.3% annual real GDP growth rate in 2017. On an annual basis, real GDP growth in 2018 is also expected to be 2.8%, compared with 2.9% in the March survey, and the median forecast for average annual real GDP growth in 2019 is 2.7%.

The panel has shifted its sentiment regarding the risks to the outlook since the previous survey, with more than half of survey respondents—57%—currently indicating that the balance of risks to real GDP growth through 2019 is weighted to the downside. Thirty-one percent of panelists indicate the balance of risks is weighted to the upside. This is in stark contrast to results in the March 2018 survey, which reflected over 75% of the panel stating risks were largely weighted to the upside for 2018. Note that the March survey was conducted when economic policy proposals were focused on tax cuts and fiscal policy in the near term. Since then, the discussion of economic policy has been dominated by tariffs and potential trade wars.

The survey asked panelists how much fiscal policy may add to or subtract from real GDP growth; the median response is an additional 40 basis points (bps) in 2018 and 30 bps in 2019. However, 60% of panelists forecast a larger-than-40-bps effect on 2018 real GDP growth, with some responses ranging as high as 100 bps. For 2019 the responses are more closely centered on the 30-bps median.

Overall, the panel assesses trade policy on U.S. GDP growth through 2019 as largely negative, although not strongly so. Just over 46% of survey respondents judge trade policy to be marginally negative, and 27% judge it as moderately negative. Another 12% report there will be no net effect to GDP growth from current trade policy, and slightly over 12% suggest a moderately or marginally positive impact.

Half of the panel expects the next recession will occur sometime between the fourth quarter of 2019 (Q4 2019) and Q2 2020. One-third suggests a later timeframe after the fourth quarter of 2020.