NABE Outlook Survey - September 2016


NABE Panel Expects Economy to Grow for at Least Two More Years, But Sees Negative Impact from Uncertainty about Election Outcome  

The September 2016 NABE Outlook presents the consensus of macroeconomic forecasts from a panel of 46 professional forecasters (see last page for listing). The survey, covering the outlook for 2016 and 2017, was conducted between August 8 and 25, 2016. 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. Thomas Kevin Swift, CBE, American Chemistry Council (chair); Steve Cochrane, CBE, Moody's Analytics; Gregory Daco, Oxford Economics; Jack Kleinhenz, CBE, National Retail Federation; and John Silvia, CBE, Wells Fargo Securities, 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: “Four-fifths of panelists participating in NABE’s September Outlook Survey expect the next U.S. business cycle peak to occur in 2018 or later,” according to NABE President-elect Stuart Mackintosh, CBE, executive director, Group of Thirty. "NABE forecasters expect the Fed to raise its interest-rate target by another quarter of one percent later in 2016 and one-half of one percent in 2017." 

“As in the June survey, there are no signs that current inflation will be picking up rapidly,” noted Jack Kleinhenz, CBE, chief economist, National Retail Federation. “Still, panelists look for prices to inch higher toward the Federal Reserve’s target of 2.0% in 2017.” “The September outlook survey represents the fourth consecutive quarterly survey in which participants have lowered their expectations for the rate of growth in 2016 for inflation-adjusted gross domestic product, or real GDP,” added Gregory Daco, head of U.S. Economics, Oxford Economics. “Panelists now foresee growth of only 1.5% this year, down from an expected 2.5% advance that was forecasted in the October 2015 survey. Lower expectations for business investment are the main contributor to the reduced GDP outlook.” 

“Half of the panelists view uncertainty regarding the outcome of the election as modestly negative for the economy, with business investment seen as the most sensitive sector,” Daco continued. “A majority—56%—of survey participants perceive a Clinton presidency as neutral for their economic growth forecast, but 60% view a Trump presidency as unfavorable for their growth forecast.” 

“The near-term outlook for homebuilding has continued to soften,” added John Silvia, CBE, chief economist, Wells Fargo Securities. “The NABE Outlook panelists now expect 1.19 million new units in 2016, down from 1.21 million projected in June and 1.24 million projected in March, but they anticipate housing starts to rise again in 2017 to 1.31 million units.” 

“With new supply expected to be a bit more limited, the panelists project house-price appreciation of 5.1% during 2016, up slightly from the 5.0% projected in both March and June,” according to Steven G. Cochrane, CBE, managing director, Moody's Analytics. “Price appreciation is still expected to slow during 2017, but the 4.4% forecast is up slightly from the 4.3% projected in June.” 


- Expectations for the pace of economic growth have moderated. The panel's median forecast for growth in inflation-adjusted gross domestic product (real GDP) from the fourth quarter of 2015 to the fourth quarter of 2016 (Q4/Q4) decreased by 0.1 percentage points to 1.8% from the June survey results. The forecasted annualized growth rate for 2016 has also inched downward to 1.5% in the current survey from 1.8% in June. The median 2017 outlook calls for 2.3% average annual growth. 

- This moderation is not reflected in expectations for consumer spending. The median forecast for growth in real personal consumption expenditures is 2.7% in 2016 and 2.6% in 2017. Both forecasts represent an increase of 0.1 percentage points from the forecasts in June. 

-The panel's median forecast projects corporate profits to be flat in 2016—an improvement from the 2.0% profit decline forecasted in June. The median forecast for profit growth in 2017 is a 4.2% gain.