Below-Trend Recovery Continues, Hindered by Policy Uncertainty

“Economists responding to the latest NABE Outlook Survey expect moderate economic growth through 2012, with little likelihood of another recession or an outbreak of inflation,” said NABE Outlook Survey Chair Shawn DuBravac, chief economist at the Consumer Electronics Association. “The median forecast of respondents is for inflation-adjusted gross domestic product—real GDP—to grow at 2.5 percent in the final quarter of 2011 and 2.4 percent for the year in 2012. Despite a relatively subdued outlook, the panel estimates that the odds of a second recession remain low. Respondents expect consumer spending to grow below trend in 2012, the unemployment rate is expected to decline only marginally over the next year, and the consensus view of the panel is that monetary policy will remain accommodative. There are several bright spots in the outlook. Business spending remains a strong positive and housing starts are expected to continue to rise from the bottom seen in 2010. Corporate profits and stock prices are predicted to strengthen. But the panel remains concerned about debt-related issues in Europe.”

• The NABE Outlook panel predicts moderate real GDP growth through year-end 2012. A 2.5 percent pace is expected during the fourth quarter of 2011, followed by a 2.4 percent growth rate in 2012, with GDP in the second half of 2012 slightly stronger than in the first half.
• The odds of a second recession are low. Only two of 42 forecasters predicted a decline in real GDP over the nearterm. As a group, the panelists saw a recession as the least likely scenario. Forecast confidence has improved, but remains low.
• The NABE Outlook panel expects employment will improve, albeit very slowly. Monthly job gains are expected to rise steadily over the forecast horizon, from an average of 100,000 during the fourth quarter of 2011 to 130,000 by the end of next year. The jobless rate will decline from 9.1 percent to 8.9 percent in 2012, but despite a majority view of modest labor market improvement, NABE economists still identified “excessive unemployment” as their single greatest concern going forward.
• Growth in consumer spending is expected to remain below trend. Consumer spending is forecast to increase 2.1 percent this year—the same consumer spending forecast as reported in the September survey. The NABE Outlook Survey panel expects consumer spending to grow 2.1 percent in 2012.
• Housing starts are expected to increase 10 percent in 2012. The economists participating in the survey expect housing starts to reach 600,000 units in 2011, just slightly above the 2010 total and a small upward revision from the September Outlook Survey forecast.
• Business spending remains a bright spot in the forecast. NABE’s Outlook panel continues to forecast solid if not spectacular growth in spending on business equipment and software in both 2011 (up 10.5 percent) and 2012 (an additional increase of 8 percent). The forecast for real spending on nonresidential structures improved from that reported in the September survey. Panelists now envisage spending on structures to increase 4.6 percent in 2011 and 4.5 percent next year. Industrial production is expected to increase 4 percent in 2011 and 3.3 percent in 2012.

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Embargoed until: Monday,November 21, 2011,12:01 AM ET

The November 2011 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 2011 and 2012, was conducted October 20- November 2.The NABE Outlook originated in 1965 and is one of three surveys conducted by NABE; the others are the NABE Industry 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 2,400 members and 32 chapters nationwide. Richard DeKaser, The Parthenon Group; Cecilia Hermansson, Swedbank; Patrick Newport, IHS Global Insight; Sean Snaith, University of Central Florida; William Strauss, Federal Reserve Bank of Chicago; Richard Wobbekind, University of Colorado; and Clare Zempel, Zempel Strategic conducted the analysis for this report. The views expressed in this report are those of the analysts and do not necessarily represent the views of their affiliated companies or institutions. This report may be reprinted in whole or in part with a proper citation to NABE.