NABE Outlook December 2015 - Summary

NABE Panel Expects Moderate Growth in GDP and Jobs in 2016 with Modest Upticks in Inflation and Interest Rate Targets

The December 2015 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 2015 and 2016, was conducted November 6-18, 2015. The NABE Outlook Survey originated in 1965 and is one of three surveys conducted by NABE; the others are the NABE Business Conditions Survey and the NABE Economic Policy Survey. Founded in 1959, the National Association for Business Economics (NABE) is the professional association for those who use economics in their work. NABE has over 2,600 members and 42 chapters nationwide. Thomas Kevin Swift, CBE, American Chemistry Council (chair); Steve Cochrane, Moody's Analytics; Gregory Daco, Oxford Economics; Jack Kleinhenz, CBE, National Retail Federation; and John Silvia, CBE, Wells Fargo, 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. 


“NABE’s December Outlook Survey panelists have lowered their forecasts for economic growth in 2015 following a slowdown in the third quarter,” according to NABE President Lisa Emsbo-Mattingly, CBE, director of research, Global Asset Allocation at Fidelity Investments. “The panel’s median forecast is for the economy to grow 2.2% net of inflation from the fourth quarter of 2014 to the fourth quarter of 2015—a slight decrease from the 2.5% forecasted in the October 2015 survey. Growth is expected to improve slightly next year—to 2.6%—although that represents a small downgrade from the previous survey’s 2016 forecast.

“Looking further ahead, two-thirds of the panelists expect potential economic growth to average between 2.0% and 2.5% during the next five years,” Emsbo-Mattingly added. “This lackluster growth potential is the consequence of tepid productivity gains which have been hindered by low capital formation, financial, environmental, and other regulatory constraints, low innovation, and workforce development/education issues.”

“Although the Federal Reserve left short-term interest rates unchanged in both September and October, a large majority of panelists—87%—expects the Fed to announce an increase in the federal funds rate at its December meeting,” said former NABE President John Silvia, CBE, chief economist at Wells Fargo. “Moreover, the majority also projects a steady rise in the funds rate throughout 2016. For the year ahead, the anticipated trajectory of the fed funds rate is lower than that anticipated in October, with a median forecast of 1.13% by the end of 2016 compared to the 1.38% forecasted in October. Meanwhile, the yield on the 10-year Treasury note is now expected to track lower than projected in the previous survey, reaching 2.88% by the end of 2016. Similar to the pattern of the funds rate, the rise in the 10-year yield is anticipated to be modest but steady during the outlook period.”

“Although light vehicle sales will experience their best year since 2000, NABE Outlook panelists have again lowered their expectations significantly for industrial production growth, with 2015 marking the first year of this recovery and expansion in which industrial growth lags that of the overall economy," says NABE Outlook Survey Chair Thomas Kevin Swift, CBE, chief economist for the American Chemistry Council. “This reflects a higher U.S. dollar, weak growth in emerging markets, rising uncertainty and lower gains in business investment, and the downturn in oil production.” 


The NABE Outlook Survey panel's median forecast for growth in inflation-adjusted gross domestic product (real GDP) from the fourth quarter of 2014 to the fourth quarter of 2015 (Q4/Q4) decreased to 2.2% since the October survey; the median forecast for 2016 dipped to 2.6%. The forecasted annualized growth rate for 2015 has also inched downward to 2.4% in the December survey from 2.5% in October; the 2016 outlook calls for 2.6% growth, down slightly from the 2.7% forecasted in October.

The downgraded forecast for 2015 is due to weaker-than-expected economic growth in the second half of the year. Indeed, with actual GDP growth of 2.1% in the third quarter and a slightly lower (by 0.1 percentage point) 2.6% growth now expected in the fourth quarter, the median forecast for real GDP growth for the second half of 2015 is lower than in the October survey. Two-thirds of the panel expect potential growth over the next five years to be in the 2.0-to-2.5% range. Only 5% of panelists anticipate less than 2.0% potential growth, and the remaining 28% expect potential growth to be higher than 2.5% per year.

Panelists foresee nonfarm payroll growth above 200,000 jobs per month through the end of 2016. But following weak September payroll data, the outlook for 2015 has been revised downward to 202,000 jobs per month. The 2016 forecast for job creation is unchanged from the October survey, just north of 210,000. Unemployment rate expectations are slightly more optimistic compared with those in the October survey; the unemployment rate is expected to decline to 4.7% by the fourth quarter of 2016 (compared to 4.8% in the October survey) and average 4.8% next year (compared to 4.9%).