The May 2021 NABE Outlook presents the consensus macroeconomic forecast of a panel of 49 professional forecasters (see last page for listing). The survey, covering the outlook for 2021 and 2022, was conducted May 7-May 13, 2021. 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 2,900 members and 44 chapters nationwide. Holly Wade (Chair), NFIB; Gregory Daco, Oxford Economics; Jan Hogrefe, Boeing; Mervin Jebaraj, University of Arkansas; Jack Kleinhenz, CBE; National Retail Federation; Jed Kolko, Indeed; and Kathleen Navin, CBE, IHS Markit, 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 panelists have grown more optimistic about the prospects for economic growth in 2021,” said NABE President Manuel Balmaseda, CBE, chief economist, CEMEX. “The median forecast calls for an 8.5% annualized growth rate in the second quarter of 2021 for inflation-adjusted gross domestic product, or real GDP. The panel has become significantly more bullish about 2021 as a whole. The median real GDP growth estimate for 2021 is 6.7%, compared to the 4.8% forecasted in the March 2021 survey.”
“NABE panelists expect near-term inflation pressure, but anticipate it being short-lived,” added Survey Chair Holly Wade, executive director, NFIB Research Center. “Inflation expectations moved up significantly from those in the March survey, but panelists anticipate inflation easing in the second half of 2021, with no resurgence in 2022.
“Over half—56%—of the respondents consider the balance of risks to economic growth in 2021 to be to the upside, while 15% expect the balance to be to the downside,” continued Wade. “Panelists point to a large fiscal stimulus program and infrastructure spending as the main upside risks.”
• NABE panelists have grown more optimistic about the prospects for economic growth in 2021 since the March Outlook Survey. The median forecast for the second quarter (Q2) of 2021 calls for an increase of 8.5% in inflation-adjusted gross domestic product (real GDP), quarter-over-quarter (q/q) annualized. This growth rate would be a strong acceleration from the Q1 2021 actual growth rate of 6.4%, and higher than the March survey median forecast for Q2 2021 of 5.2%. The median forecast for the Q3 2021 growth rate has also risen from that in the March survey, to 6.2% (from 5.6%), while the median forecast for Q4 2021 remains at 4.8%.
• The median forecast for the change in real GDP from Q4 2020 to Q4 2021 is 6.7%, compared to 4.8% in the March survey. The median real GDP growth estimate for 2022 is 2.8%.
• On an annual-average basis, the panel expects real GDP to increase 6.5% in 2021, and then to taper off to 4.4% growth in 2022.
RISK ASSESSMENT TO GDP GROWTH
• Panelists’ views regarding risks to growth in 2021 vary widely. Fifty-six percent view risks as skewed to the upside— a small increase from the 51% in the March survey. Fifteen percent of respondents expect downside risks, and 29% view risks to the outlook as weighted neither to the upside or downside.
• Pandemic-related topics continue to dominate the downside risk assessment. More than a third of panelists (35%) view vaccine-resistant variants of COVID-19 as the biggest downside risk, followed by 21% of respondents who express concerns about slowing vaccine uptake. A substantial stock market decline or market volatility is cited as the biggest downside risk by 12% of respondents, while 7% cite potential monetary policy missteps.
• A plurality of panelists, 42%, regards large fiscal programs as the biggest upside risk to the economy. These panelists’ concerns are evenly divided between an infrastructure spending program and a large fiscal stimulus program. Stronger global growth is cited as an upside risk by 17% of panelists, while 12% cite stronger wage growth. A faster vaccine rollout is cited as the biggest upside risk by 14% of panelists, down from 31% in the March survey, and 78% in the December survey.
• There was a notable shift in the panel’s view on the timing of a job recovery between the March survey and this survey. The panel now expects the recovery to occur sooner, with 66% of survey respondents anticipating nonfarm payrolls will return to pre-COVID-19 levels in 2022 or Q4 2021. Ten percent expect this to occur in Q4 2021, 27% in the first half (H1) of 2022, and 29% in H2 2022. In the March survey, 59% anticipated that to occur in 2023 or later.
• Survey respondents expect nonfarm employment in 2021 and 2022 to be greater than anticipated in the previous survey. The median projection for monthly nonfarm payroll employment growth in 2021 is 566,100, compared to 351,000 in the previous survey. While panelists do not expect employment growth to be as strong in 2022 as in 2021, the median forecast calls for 281,000 monthly net new jobs, approximately 9% more than the 258,000 forecasted in the March survey.
• The median forecast calls for the unemployment rate to average 5.6% in 2021, 0.2 percentage points lower than the median forecast in the March survey. The panel expects the unemployment rate to decline steadily through Q3 2022. Respondents anticipate the unemployment rate will average 4.3% in 2022.
• Nonfarm business compensation growth is projected to increase 3.3% in 2021. The current 2021 forecast is up from the previous estimate of 3.0% in the March survey. Panelists anticipate nonfarm business compensation to grow at a slower pace of 2.9% in 2022.
PRICES AND INTEREST RATES
• Survey respondents expect inflation to accelerate strongly in 2021 before cooling in 2022. Inflation, as measured by the Consumer Price Index, is forecasted to be 2.8%, year over year (y/y) in Q4 2021, and 2.3% y/y in Q4 2022, compared to the actual 1.2% in 2020. Panelists anticipate that the personal consumption expenditures (PCE) price index, less food and energy, to rise 2.2% y/y in Q4 2021, and 2.1% y/y in Q4 2022.
• A vast majority of panelists (81%) expects the federal funds target range to remain where it currently stands through 2021, with an upper limit of 0.25%. The median forecast for the rate at the end of 2022 is for no change from 2021. These medians are the same as in the March survey.
• Expectations for 10-year Treasury yields have risen strongly. The median projection calls for the yield to close 2021 at 1.90%, up from 1.45% forecasted in the March survey. Yields are expected to rise to 2.10% by year-end 2022, about 30 basis points higher than the March survey.
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