NABE Outlook Survey - December 2016




NABE Panel Expects Economic Growth and Inflation to Creep Higher, and the Fed to Increase Interest Rates, in 2017


The December 2016 NABE Outlook presents the consensus of macroeconomic forecasts from a panel of 52 professional forecasters (see last page for listing). The survey, covering the outlook for 2016 and 2017, was conducted between October 31 and November 16. (Note that panelists who submitted forecasts before the U.S. election results were known on November 9 were contacted and given the opportunity to resubmit.) 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 2,500 members and 40 chapters nationwide. Timothy Gill, CBE, American Iron and Steel Institute (chair); Steve Cochrane, CBE, Moody's Analytics; Gregory Daco, Oxford Economics; Keith Phillips, Federal Reserve Bank of Dallas; David Teolis, General Motors Company; 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: “Results from NABE’s December 2016 Outlook Survey show that expectations for broad economic growth through 2017 have changed little in the last three months,” according to NABE President Stuart Mackintosh, CBE, executive director, Group of Thirty. “Real GDP is expected to increase 1.6% in 2016, before accelerating to 2.2% in 2017. Few economists participating in the survey believe a business cycle peak is imminent. However, the slow pace of growth in recent years may be the ‘new normal,’ as more than 80% of survey panelists estimate that the potential rate of economic growth will be 2.5% or lower over the next five years. Panelists identified boosting infrastructure investment and reforming tax and regulatory policies as the most important things the incoming administration and Congress can do to lift economic growth during the next presidential term.” 

“Panelists expect oil prices to continue to rebound, long-term interest rates to trend higher, and compensation gains to increase in 2017,” said Timothy Gill, CBE, chief economist, American Iron and Steel Institute. “While inflation shows little sign of rapid acceleration, stronger growth is expected across several key price measures next year. With labor market conditions forecasted to remain firm, the panel’s consensus is that the Federal Reserve will raise the federal funds rate this month and implement two additional increases next year, bringing the midpoint of the target range to 1.125% by the end of 2017.”


  • Expectations for the pace of economic growth are largely unchanged from those in the September 2016 Outlook Survey. The panel's median forecast of 2.2% growth in real GDP from the fourth quarter of 2016 to the fourth quarter of 2017 is unchanged from the September survey. The annualized growth rate forecasted for 2017 inched downward to 2.2% in the current survey from 2.3% in September. Both projections illustrate the panel’s expectation of accelerating growth in 2017 compared with the median estimate of 1.8% year-to-year growth in 2016 Q4, and a 1.6% annual growth rate for 2016 as a whole.
  • Relatively few panelists (8%) expect the next U.S. business cycle peak will occur before 2018. One-third of panelists forecasts a peak during 2018 with another one-third expecting a peak in 2019. Twenty-three percent expect the current expansion to continue at least until 2020.
  • Nearly half the panel (46%) rates the probability of recession during the next 12 months between 16% and 25%. One-quarter puts the risk at between 6% and 15%. The remainder of the panel is split between a 26% or higher risk (19% of panelists) and 5% or lower risk (10% of panelists). The recession-risk distribution shifts higher when the time frame is extended to the next 24 months. Over half the panelists (52%) cite the risk at between 11% and 30% probability, while two-fifths rate the risk at between 31% and 50%. Only about 4% believe the risk is 10% or less, while an equal share believes the risk is greater than 50%.