NABE Outlook June 2014

The June 2014 NABE Outlook presents the consensus of macroeconomic forecasts from a panel of 47 professional forecasters (see last page for listing). The survey, covering the outlook for 2014 and 2015, was conducted May 8-21, 2014. The NABE Outlook Survey originated in 1965 and is one of three surveys conducted by NABE; the others are the NABE Industry 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 41 chapters nationwide. Timothy Gill, National Electrical Manufacturers Association (chair); Craig Alexander, TD Bank; Robert Kleinhenz, Los Angeles County Economic Development Corporation; Ken Simonson, Associated General Contractors of America; and Richard Wobbekind, Leeds School of Business, University of Colorado at 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’s June 2014 Outlook Survey panelists expect stronger economic growth for the balance of this year than they did three months ago,” said NABE President Jack Kleinhenz, chief economist of the National Retail Federation. “The consensus forecast is that real GDP will advance at a strong 3.5% annualized clip in the second quarter of 2014, bolstered by activity that was postponed due to adverse weather conditions earlier in the year. The March survey called for a 2.8% second-quarter gain. Growth expectations for the third and fourth quarters of 2014, at 3.1% and 3.2%, respectively, have also been revised upward.

“The latest forecast for annual real GDP growth this year is lower than the previous survey, though, due to a contraction in the first quarter. On an annual average basis, real GDP growth is seen increasing from 1.9% in 2013 to 2.5% in 2014, down from March’s expectation of 2.8%. The panel’s forecast of a further acceleration to 3.1% real GDP growth in 2015 is unchanged from March. Expectations for business investment, housing construction, exports and government outlays have been tempered. In contrast, consumer spending is projected to increase—and the labor market to improve—both more quickly than previously forecast. Moreover, inflationary expectations remain low.”

“The majority view is that the Federal Reserve will terminate its long-term asset purchase program by the end of 2014 and begin to raise the federal funds rate in 2015,” according to NABE Outlook Survey Chair Timothy Gill, deputy chief economist of the National Electrical Manufacturers Association. “Nonetheless, interest rates are expected to rise only modestly in the near term. The panel’s median forecast puts the federal funds rate at only 0.75% and the 10- year Treasury yield at only 3.75% by the end of 2015.” 

Highlights:

• The panel forecasts quarterly economic growth for the balance of 2014 to be stronger than was expected in March. Panelists now expect the annualized rate of real GDP growth to jump to 3.5% in the second quarter of 2014 and to equal or exceed 3% for each quarter through the end of 2015. The median forecast reflects the view that 1.2 percentage points of second-quarter growth is due to the “rebound effect” of activity that was postponed because of unusually severe winter weather in the first quarter.
• On an average annual basis, the median real GDP forecast for 2014 is for a 2.5% increase—weaker than the 2.8% projection reported in March’s survey following a 1.0% contraction in the first quarter. Nonetheless, the marked-down forecast would still represent stronger economic growth than the 1.9% GDP growth rate realized in 2013. The median forecast for 2015 is 3.1%—unchanged from March’s forecast.
• In contrast, sentiment regarding the labor market has become more upbeat. Nonfarm payrolls are expected to post an average monthly gain of 209,000 in 2014, a marked improvement from the expectations of only 188,000 net new jobs in the March survey. The pace of job creation is expected to hold steady at 209,000 per month in 2015. Likewise, the unemployment rate is expected to fall to an average of 6.2% in 2014 and decline further to 5.9% in 2015. Expectations for compensation growth are unchanged from the previous survey, with compensation per hour expected to rise at a 2.0% pace this year and 2.5% next year. 

NABE Members can download the full report here (PDF)