NABE Outlook Survey - March 2018


NABE Panel Foresees Pick-Up in Economic Growth through 2018, with Boost from Fiscal Policy; Inflation Expected to Remain Mild

The March 2018 NABE Outlook presents the consensus macroeconomic forecast of a panel of 51 professional forecasters (see last page for listing). The survey, covering the outlook for 2018 and 2019, was conducted February 28-March 7, 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 2,800 members and 40 chapters nationwide. David Altig, Federal Reserve Bank of Atlanta, 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 panelists are more optimistic about the U.S. economy in 2018 than they were three months ago, especially regarding prospects for the industrial sector of the economy,” said NABE Vice President Kevin Swift, CBE, chief economist, American Chemistry Council. “The panel’s median forecast for average annual real gross domestic product (GDP) growth in 2018 is 2.9%, up from 2.5% in the December survey. In addition, 76% of panelists believe that risks are weighted to the upside.”

“In large part, the increase in growth prospects appears related to federal fiscal policies,” added survey chair David Altig, executive vice president and director of research, Federal Reserve Bank of Atlanta. “The median estimate of the impact on real GDP growth resulting from fiscal policy changes is an increase of 0.45 percentage points in 2018, and 0.3 percentage points in 2019.

“The outlook for inflation remains modest,” continued Altig. “Overall, panelists expect that inflation, as measured by the personal consumption expenditures (PCE) price index, will increase by 1.9% from the fourth quarter of 2017 to the fourth quarter of 2018 (Q4/Q4), up just a tick from the December forecast of 1.8%. The Q4/Q4 median inflation forecast for 2019 is also 1.9%.

“Relative to the December survey results, panelists have downgraded the probability of a recession occurring by the end of 2018,” noted Altig. “Slightly less than 7% of respondents put the probability of a recession this year at greater than 25%, compared to the 12% who held this view in December. The top three downside risks cited by panelists are a stronger dollar, weak wage growth, and inflation.” 



The median forecasts for growth in inflation-adjusted gross domestic product (real GDP) are 2.9% between the fourth quarter of 2017 (Q4) and 2018 Q4, and 2.5% between Q4 2018 and Q4 2019. The forecast for 2017-2018 represents an upward revision from the 2.4% in the December 2017 Outlook Survey. On an annual basis, the median real GDP growth forecast for 2018 is also 2.9%, compared with 2.5% in the December survey. Overall, the panel expects economic growth in 2018 to be significantly stronger than the 2.3% annual GDP growth rate in 2017. The panel’s median forecast for average annual GDP growth in 2019 is 2.7%, 0.2 percentage points less than in 2018.

Seventy-six percent of panelists believe the balance of risks to the economy through 2018 is weighted to the upside, while 20% believe the balance of risks is weighted to the downside. The risk assessment has strengthened since the December survey, in which 60% of panelists believed the risks were on the upside, compared to 33% who believed risks were on the downside. The panel ranks the top three downside risks to the economy as a strong dollar, weak wage growth, and inflation. The top three upside risks are corporate tax reform, individual income tax cuts, and stronger global growth.

The median forecast for the year-end 2018 midpoint of the federal funds target range is 2.125%, implying a slightly steeper anticipated interest-rate trajectory than in the previous survey. In the December Outlook Survey, the median federal funds rate forecast was 1.983%. A currently anticipated increase in the federal funds target range would be equivalent to two more 25-basis-point rate hikes by the end of this year. Projections for 2019 imply a split between two and three rate hikes, with a year-end rate of 2.75%.