The Rural Patriot

September 11, 2006

The National Association for Business Economics Revises Projections

Filed under: US Economy — theruralpatriot @ 11:14 am

“Growth is not as robust as it was in the spring, but the economy is by no means going dormant,” said Carl Tannenbaum, NABE president-elect and chief economist at LaSalle Bank/ABN AMRO, N.A. in Chicago. “While the NABE outlook is less sanguine that it was when we last polled in May, our panel still sees only a 1-in-4 chance the current expansion will end before the end of next year.”

Here are their key revisions:

2006:  NABE projects a GDP increase at a 2.6% annual rate for the 3rd & 4th quarters; previous projections were 3.1% (3rd quarter) and 3% (4th quarter).  The 1st quarter of 2006 saw a 5.6% increase, and the 2nd quarter saw a 2.9% increase.

Projection of economic growth for this year is now at 3.4%, down from their prior estimate of 3.5%.  2007’s new projection is 2.7%; the prior estimate was 3.1%.   2005 growth was 3.2%.

With the economy slowing, the Federal Reserve in early August halted a campaign that had steadily pushed interest rates up for two-plus years. That left a key rate controlled by the Fed at 5.25 percent.

NABE’s forecasters believe there will not be any more rate increases — either at the Fed’s next meeting Sept. 20 or through the rest of this year. In fact, the forecasters predict the Fed will cut rates next year.

Consumer prices are projected to rise 3.6% this year; the prior estimate was 3%.  2005 saw a 3.4% rise, (highest in 5 years).  2007’s new projection is for a  2.6% rise; the prior projection was 2.4%

Unemployment rate: 2005 averaged 5.1%; the projection for 2006 is 4.7%; the projection for 2007 is 4.9%.

The forecasters ranked high energy prices as the biggest risk to the economic expansion. Still there also were some concerns expressed about a sharper-than-expected slowdown in the housing market triggering a drop in home prices in many markets. Such a scenario could spell trouble for the overall economy.

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