NABE Outlook October 2015 - Summary

NABE Forecasters Expect Real GDP Growth of 2.5% to 2.8% Through 2016, Job Gains to Persist, and Inflation to Remain Muted; Majority Still Expects a Fed Rate Hike by Year-End

The October 2015 NABE Outlook presents the consensus of macroeconomic forecasts from a panel of 50 professional forecasters (see last page for listing). The survey, covering the outlook for 2015 and 2016, was conducted September 16-23, 2015. The NABE Outlook Survey originated in 1965 and is one of three surveys conducted by 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 2,600 members and 42 chapters nationwide. Timothy Gill, National Electrical Manufacturers Association (chair); Robert Kleinhenz, Los Angeles County Economic Development Corporation; Tim Mullaly, FedEx Corporation; Arun Raha, Eaton 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: “Following a strong second quarter, NABE’s October Outlook Survey panelists have raised their forecasts for economic growth in 2015,” according to NABE President-Elect Lisa Emsbo-Mattingly, director of research, Global Asset Allocation, Fidelity Investments. “The panel’s median forecast is for the economy to grow 2.5% net of inflation on both an average annual basis and a fourth quarter of 2014 to fourth quarter of 2015 basis, a slight increase from the forecast in the previous survey conducted in June. Growth is expected to marginally improve to 2.7% in 2016, although that represents a small downgrade compared to the previous survey’s forecast for next year.

“On balance, the NABE Outlook panelists feel that the rise in the value of the U.S. dollar compared to other currencies and the ongoing economic slowdown in China are having a negative effect on the U.S. economy, while lower crude oil prices and monetary policy easing by foreign central banks are having a positive effect,” adds Emsbo-Mattingly. “Partly as a consequence, the median forecast for export growth has fallen to under 2% for this year, a deceleration from 2014. Both consumer spending growth and housing starts, meanwhile, are forecasted to climb to post-recession highs.”

“Although the Federal Reserve left short-term interest rates unchanged in September, a large majority of panelists expects an increase before the end of 2015,” said NABE Outlook Survey Chair Timothy Gill, deputy chief economist of the National Electrical Manufacturers Association. “Seventy-nine percent of panelists believe the Fed will announce a rate hike at either its October or December policy meeting. Still, the anticipated trajectory for the federal funds rate is lower than that anticipated in June, with a median forecast of 1.375% by the end of next year compared to the 1.625% forecasted in June. Likewise, the yield on the 10-year Treasury note is now expected to track lower than in the previous survey, reaching 3% by the end of 2016.”


NABE Outlook panelists’ median forecast for growth in inflation-adjusted gross domestic product (real GDP) from the fourth quarter of 2014 to the fourth quarter of 2015 (Q4/Q4) increased to 2.5% since the June survey; the median forecast for 2016 dipped to 2.7%. The forecasted annualized growth rate for 2015 has also inched upward to 2.5% in the October survey from 2.4% in June; for 2016, the forecast calls for 2.7% growth, a decline from the 2.9% forecasted in June.

 The upgraded forecast for 2015 is due to stronger economic growth in the first half of the year than was previously expected. Indeed, the median forecast for real GDP growth for the second half of 2015 is lower than in the June survey, with growth rates of 2.5% and 2.7% now expected in the third and fourth quarters, respectively. This compares to increases of 3.2% and 3.0% forecasted in the June survey.

The survey results reveal expectations for a slowing—but still robust—pace of job creation. The median forecast for nonfarm payroll employment growth in both 2015 and 2016 is an increase of just over 210,000 per month, similar to June’s forecast. Payrolls grew at a 260,000 monthly clip in 2014. Unemployment rate expectations are slightly improved compared to those expressed in June; the unemployment rate is expected to fall to 5.1% on average during the fourth quarter of 2015 and to 4.8% on average during the fourth quarter of 2016.