U.S. Forecast December 2013

U.S. Forecast

December 2013

Institute for Economic Competitiveness College of Business Administration University of Central Florida

ABOUT UNIVERSITY OF C E N T R A L F LO R I DA ( U C F )

ABOUT THE COLLEGE OF B U S I N E S S A D M I N I S T R AT I O N

Institute for Economic Competitiveness College of Business Administration University of Central Florida

FO R E C A S T FO R T H E N ATI O N Forecast 2013 - 2017 December 2013 Report

Published quarterly by the Institute for Economic Competitiveness, College of Business Administration, University of Central Florida Copyright Š 2013 Institute for Economic Competitiveness. All rights reserved.

Publications of the Institute for Economic Competitiveness are made possible by the following staff: Dr. Sean Snaith, Director Angela Ayala, Administrative Assistant Alexandra Betrone-Harpst, Researcher Melissa Hedtke, Researcher Ashley Miller, Researcher Casey Moore, Researcher Sangitha Palaniappa, Researcher This forecast was prepared based upon assumptions reflecting the Institute for Economic Competitiveness’ judgments as of the date it bears. Actual results could vary materially from the forecast. Neither the Institute for Economic Competitiveness nor the University of Central Florida shall be held responsible as a consequence of any such variance. Unless approved by the Institute for Economic Competitiveness, the publication or distribution of this forecast and the preparation, publication or distribution of any excerpts from this forecast are prohibited.

H IGH LIGH T S OF T H E 4 Q 2 013 U. S. F OR EC A S T In this Issue of the U.S. Forecast: • When economic policy is the problem and not the solution.

• It’s the year without a Santa Claus; holiday shopping spending will be the weakest in years.

HIGHLIGHTS

• Ubiquitous, unyielding uncertainty undermines unemployment’s upside.

• Real GDP growth in the 4th quarter of 2013 will be just 1.6%, a dramatic slowdown from the inventory inflated estimate of 3.6% growth for the 3rd quarter of 2013. This lost momentum, policy uncertainty, and sequestration will keep growth slow for 2014, at 1.6%. Growth will gradually rise to 2.8% in 2015 and 2.9% in 2016 before Fed tightening will ease growth to 2.8% in 2016.

• The Affordable Care Act is already impacting the labor market, and as the law is being implemented in a piecemeal fashion, expect that impact to grow especially once the employer mandate is finally enforced. Also expect the unexpected; a law this complex always carries significant baggage of unintended consequences.

• GDP growth in 2013 should average 1.7% before growth accelerates to 2.3% in 2014, 2.8% in 2015, and 2.9% in 2016. Growth will then ease back to 2.8% in 2017 as the unwinding of monetary stimulus slows economic growth.

• Real consumer spending is expected to grow an average of 2.6% during 2013-2017, while mildly accelerating over this period. Consumers’ balance sheets are healing thanks to a housing market rebound, and this will help push up spending if the housing price gains can persist.

• The housing market recovery continues along its protracted path. The housing market should steadily improve through 2016. During 20132017, housing starts will rise from 913,348 in 2013 to 1,565,554 in 2017.

• Payroll employment growth remains sluggish. Economic and policy uncertainty weigh on the private sector and firms are still hesitant to hire new workers. Consequently, payrolls will only expand 1.6% in 2013 and 1.5% in 2014. Growth in 2015 inches to 1.6% and stays there for 2016 before easing to 1.3%.

• Unemployment rates (U-3) are expected to gradually fall to 6.0% in the 4th quarter of 2017. Underemployment (U-6) remains a serious problem and currently stands at 13.2%.

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WHEN ECONOMIC POLICY IS THE PROBLEM, NOT THE SOLUTION In the fall of 2009 the economy was in the earliest stages of what is now a 4.5-year-old economic recovery.

President Obama and a Democrat-controlled congress had the run of the legislative house in 2009 and 2010. To the victor go the spoils, as they say, and Democrats enjoyed what turned out to be a brief two-year period of legislative immunity. During this window of opportunity three large and complex bills were passed and signed into law. The first was the American Reinvestment and Recovery Act aka the stimulus act (signed into law February 17, 2009), the second was the Patient Protection and Affordable Care Act aka Obamacare (signed into law March 23, 2010) and lastly the Dodd–Frank Wall Street Reform and Consumer Protection Act (signed into law July 21, 2010).

The Stimulus Act passed the House of Representatives with zero yes votes from Republicans and passed the Senate with just three Republican votes (one from Arlen Sector if that counts as Republican). The Affordable Care Act passed the house with no Republicans voting for it and the same was true in the Senate. The Dodd-Frank law passed the house without one Republican vote and 27 Democrats voting against the law.

In my opinion, in all three instances legislative action was necessary; it is unfortunate that it happened in an extremely partisan fashion. This is not to say a straight Republican version of any of these laws would have been the perfect solution either. I am a firm believer that both sanity and the solutions to our major problems lay in the middle of the political spectrum and not to the far left or the far right. Nonetheless these three policies were driven entirely by the left and thus culpability for their success or failure for that matter is owned by those who passed them in such a partisan manner.

Furthermore the rushing of several large and complex pieces of legislation caused me great anxiety that led me to assert in the Fall of 2009 that by pushing forward simultaneously on legislative solutions to such large and difficult issues, the administration was guilty of an “audacity of scope.” My fear at the time was that none of the problems would be adequately addressed by these legislative initiatives and four years later my fear then appears to be justified. The Stimulus Act, while necessary in the sense that the federal government could not sit idly by as the Great Recession ravaged the economy, did not deliver the results that the president’s economic team projected that it would. As a result this was one of several policies that I had labeled a Sky Mall policy – an expensive policy that did not solve the problem it was supposed to solve (inspired

by my pricey Sky Mall purchase of an industrial strength clothes steamer that did not solve my wrinkled suits problem).

The predicted benefits of the Stimulus Act on the labor market turned out to be woefully short of what the actual outcome in the labor market has turned out to be. Part of the failure of the stimulus may indeed be attributed to the structure of the law, but the passage of the other two large and complex laws, in my opinion, played a larger role in undermining the efficacy of the stimulus.

The Affordable Care Act’s rollout has made the launch of New Coke look like the release of a new iPhone, and questions persist well beyond the Healthcare.gov website’s disastrous launch as the law is looking more and more like the tip of a legislative iceberg that could sink the economic and labor market’s recoveries. The section that follows on economic policy uncertainty demonstrates that the failure of this law to date has wreaked more damage to the economy than it has done to help solve the manifold problems with healthcare in our nation. The delays of select portions of the law, in addition to raising serious constitutional issues, has economically only served to extend the fog of uncertainty that currently enshrouds the economy further into the horizon preventing the recovery from gaining much needed momentum.

The follies of the rollout of the Affordable Care Act have taken much of the attention of the country away from an equally poor rollout of another law, one that is more esoteric to the average American, certainly less personal, the DoddFrank Act. It is very clear to a consumer who received a cancelation of their existing health insurance policy that is directly attributable to the Affordable Care Act how this health care policy is affecting them personally.

How a financial regulatory reform law may be preventing that same consumer from being able to get a mortgage is far from clear to most consumers. There is no letter sent to the consumer attributing the decline of a mortgage application to a specific law or regulation.

The Davis Polk Law Firm releases monthly progress reports on the roll-out of the Dodd-Frank law. In the most recent report1 the firm reports that of 280 rulemaking requirement deadlines that have passed, 168 or 60% have been missed. When or even if, all of these rulemaking requirements will be met creates an environment of 1

http://www.davispolk.com/sites/default/files/Dec2013_ Dodd.Frank_.Progress.Report_0.pdf Institute for Economic Competitiveness

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U . S . F orecast regulatory uncertainty for the financial sector. This type of uncertainty, as was discussed in our September 2013 U.S. Forecast, will not likely be fully reflected in the Economic Policy Uncertainty Index discussed below.

This does not imply that the uncertainty regarding Dodd-Frank is benign or that it doesn’t matter for the non-financial sectors of the economy. This is another very large and complex law that has consequences for the real side of the economy, just as the Affordable Care Act does.

Financial institutions are left to guess what parts and when –if ever– the law will be fully implemented, and customers of these institutions are left in the wake as the sector attempts to divine what comes next.

It is one thing to hastily pass complex legislation that burdens the private sector with widespread changes to rules that govern large portions of our economy that will, and have already, generated unintended consequences. It is another thing to pass the laws then fail to implement them in a timely manner, or pick and choose what portions of the law will be enforced based upon the ever shifting winds of

politics. This only thickens the fog of policy uncertainty, and in the attempt to solve real problems with healthcare and financial regulation, not only do those problems go unfixed but even more problems get created.

Economic Policy Uncertainty Index Surges

A Disastrous Start for the Affordable Care Act Heightens Uncertainty and Further Undermines the Recovery Economic policy uncertainty has resulted in a recovery that is the weakest since the Great Depression. This is of course not news, but a repetition of a mantra that has been made on these pages and elsewhere when trying to explain the failure of this recovery to strengthen the way its predecessors did.

Figure 1: The Economic Policy Uncertainty Index 300

Expansion Recession

250

Recession Expansion

Recession Expansion

Expansion

Uncertainty Index

200

150

100

50

Uncertainty Index Averages 0

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Year

Source: Scott R. Baker, Nicholas Bloom, and Steven J. Davis, Measuring Economic Policy Uncertainty 6

U.S. Forecast | December 2013

U . S . F orecast The labor market, as well, has been impacted not only by the weak recovery, but because of the prevalence of uncertainty, specifically surrounding the implementation and impacts of the Affordable Care Act. The delay of the employer mandate will temporarily stave off the consequences of the law for the overwhelming majority of Americans who get their healthcare through their employer. Their numbers far exceed those who get their insurance as individuals, and if the chaos in the individual market portends what will happen in the employer provided market, the labor market will be impacted well into 2015.

Current levels of the Economic Policy Uncertainty Index have surged to levels on par with the average values that were observed in the last six months of 2012, when questions about the Bush tax cuts, expiration of payroll tax cuts and budget sequestration collectively loomed as what became known as the fiscal cliff. The October 2013 level of the policy uncertainty index is just a fraction above 174.

This reading has jumped 86% from the lowest level of the entire recovery to date in July when the index fell to 93.5.

With this recent surge in policy uncertainty, as captured by this index, uncertainty has surpassed the average level of uncertainty that has prevailed during the recovery.

After the end of the Great Recession, policy uncertainty increased from the already elevated levels during the recession, a break from the behavior exhibited after the previous two recessions (1990-91 and 2001). While the policy uncertainty index only goes back to 1985, one would imagine that this pattern also prevailed for many if not all of the recessions that preceded the 1990-91 downturn.

The survey asks panelists to estimate the probability that real GDP will decline in the quarter in which the survey is taken, as well as the probabilities of a decline in each of the following four quarters. The anxious index (a term coined by The New York Times reporter David Leonhardt) is the probability of a decline in real GDP in the quarter after a survey is taken. In the survey taken in the 4th quarter of 2013, the index stands at 11.12%, which means that forecasters believe there is an 11.12% chance that real GDP will decline in the 1st quarter of 2014, down, ever so slightly from last quarter’s anxious index of 11.21%.

The forecasters also report an 11.27% chance that we are currently (as of the 4th quarter of 2013) in a recession.

According to the panel, the probability that we will fall back into recession is averaging around 11.9% through the end of the 4th quarter of 2014, which implies the possibility of a recession in the upcoming year has increased slightly since last quarter’s survey.

The decline in anxiety over the future of this economic recovery comes in the wake of a weak 1st quarter GDP report (1.1%), followed by a 2nd quarter GDP growth of 2.5%, and an unexpectedly strong first reading on 3rd

Figure 2: Index The Anxious Probability of DeclineThe in Real GDPIndex in the Following Quarter Anxious Quarterly, Probability of Decline in 1968:Q4 Real GDPtoin2013:Q4 the Following Quarter Quarterly, 1968:Q4 to 2013:Q4

Anxious Index 100 100 90 90 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0

19681968 19691969 19701970 19711971 19721972 19731973 19741974 19751975 19761976 19771977 19781978 19791979 19801980 19811981 19821982 19831983 19841984 19851985 19861986 19871987 19881988 19891989 19901990 19911991 19921992 19931993 19941994 19951995 19961996 19971997 19981998 19991999 20002000 20012001 20022002 20032003 20042004 20052005 20062006 20072007 20082008 20092009 20102010 20112011 20122012 20132013 20142014

Probability (percent) Probability (percent)

The most recent release (4th quarter of 2013) of the Survey of Professional Forecasters by the Federal Reserve Bank of Philadelphia suggests that the 40 forecasters surveyed (including yours truly, though I am more uptight than the average the economists who participated) for the publication are 11.12% convinced that a decline in real GDP will occur in the 1st quarter of 2014. This quarter’s release reflects a very slight easing of forecasters’ anxiety, perhaps as a result of initial readings of 3rd quarter real GDP

growth that were above expectations. The avoidance of the full impact of the fiscal cliff, sequester notwithstanding, has caused the index to drop significantly from 23.04% in the 4th quarter of 2012. Given the problems with the rollout of the healthcare law, next quarter’s Anxious Index will be interesting to observe whether or not economists’ faith has been shaken by the Affordable Care Act’s struggles.

0

Survey Date Survey Date

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quarter real GDP growth of 2.8%. Despite this seemingly upward trend of real GDP growth over the course of the year, most economists are expecting a sharp deceleration of growth in the fourth quarter.

Figure 2 plots the historical values of the anxious index, where the gray bars indicate periods of recession in the U.S. economy. The current levels of the anxious index are well below their average level during the economic recovery, and they are just 0.9 points lower than last quarter.

GDP Outlook 2012 came to an end with a whimper as real GDP growth in the 4th quarter was near zero. Growth at the start of 2013 has picked up, but was still subpar at 1.1%.

Consumer spending grew 2.3%, seemingly shrugging off smaller take home pay due to the expiration of payroll tax cuts. This burden on the consumer is in addition to the ongoing struggles in the labor market and the lost housing wealth that has plagued many consumers when housing prices plunged in many areas of the country. Consumers slipped back in the 2nd quarter as growth eased to 1.8% and even slower in the 3rd quarter at 1.5%. Consumers should eventually start to emerge with a continued recovery, albeit still weak, in the labor market coupled with the progress being made in the housing market that will help alleviate the damage the recession and housing market inflicted upon this critical sector of the U.S. economy.

However, consumption spending growth is not expected to become the locomotive that will pull overall economic growth to more robust levels, but rather a little engine that could slowly chug its way to moderately higher growth.

In this, the weakest recovery in the post-war era, quarterly real GDP growth is a fraction of the growth we have experienced following the 1981-82 recession.

Average compound annual quarterly growth rates for real GDP averaged 3.4% since the end of the 1981-82 recession through the last recovery that ended in Q4 2007 (included in that 3.4% average are the 1990-91 and 2001 recessions.)

When comparing this recovery to previous recoveries the weakness is even more apparent. Average quarterly real GDP growth rates in the recovery following the 1981-82 recession were 4.44%. During the recovery following the 1990-91 recession average growth rates were 3.77% and average quarterly growth rates were 2.81% during the recovery following the 2001 recession. Average quarterly real GDP growth rates thus far in this recovery are only 2.08%.

As we have discussed earlier in this and previous forecast publications, economic policy uncertainty has played a big role in the underwhelming performance of the economic recovery this time around. Looking forward through the 8

U.S. Forecast | December 2013

rest of 2013, the pace of economic recovery is likely to slow and is expected to be 1.7% for the fourth quarter of this year. We are anticipating growth of just 1.7% for the full year 2013–the weakness coming from a combination of the sequestration cuts, rising payroll taxes, ubiquitous uncertainty, the repeated threat of a government shutdown and/or a battle over raising the debt ceiling, and a sluggish first half of the year.

Over the course of 2014 if uncertainty should begin to abate and a recovery in the housing market continues to heal consumer’s balance sheets, real GDP growth will accelerate to 2.3%. Growth will continue to rise in 2015, reaching 2.8% and 2.9% in 2016. In 2017 as stimulus continues to be drained by the Federal Reserve, growth will ease back to 2.8%.

CONSUMER SPENDING

The Year Without a Santa Claus?

The traditional start of the holiday shopping season has been for years known as Black Friday, the day after Thanksgiving when retailers focus on the start of the time of the year when retailers become profitable or in the jargon of the business world they get into “the black”.

Black Friday has been declining in importance as online commerce continues to boom and the start of the holiday shopping season in traditional retailers has crept into Thanksgiving Day. But retailers continue to focus on this day as the start of the holiday push.

Unlike previous years there was not rampant media coverage about robust sales and long lines of eager consumers just waiting to get their hands on “door busters” this Black Friday. There were the requisite stories and footage of the lines of campers outside of big box retailers but many of those interviewed said their action was more born of desperation or severe budget constraints. Sure there were those looking to participate in thrill of “the running of the retail bulls.” (Is there a Wal-Mart in Pamplona?)

What did seem rampant was an inordinate amount of e-mails flooding my inbox with sales offers that seemed to smell a bit of desperation. Gaudy discounts were being flaunted, and not just on one or two loss-leading items designed to get you in the store or on a website where you would hopefully spend more on less heavily discounted wares. No, these were 50% off (or more) offers on whole classes of goods or in some cases on your entire purchase.

Black Friday seemed more like Sooty Friday this year and the dirty business of trying to get U.S. consumers to spend more this holiday season is likely to result in retailers getting gored in this year’s running of the retail bulls. Holiday spending growth will likely be the weakest since the recovery began and while the National Retail

U . S . F orecast

Federation is predicting 3.9% spending growth this year we may very well see something much closer to 3.0% than to 4.0%.

U.S. consumers are still feeling the effects of the phony labor market recovery (see our U.S. Forecast September 2013.) Consumption has been suppressed in this recovery relative to those that have preceded it, as U.S. consumers are simply not leading the way in this recovery. U.S. consumers have historically been big spenders, borrowing money to finance this spending when our current incomes could not support it.

Lost home equity wealth may be part of the problem as this has historically been an easy and low cost way of tapping into wealth that consumers built up over time. But the trauma of the housing and financial crises and the Great Recession has ushered in what I described in comments to the Associated Press in 2010 as a “mini-age of austerity.”

This age has not yet passed I am afraid and the most recent report on 3rd quarter GDP growth confirms these fears.

Real consumer spending growth is expected to fall to a paltry 1.5% rate of growth in the 3rd quarter. Not exactly a launching pad for the holiday shopping season. Fourth quarter growth boosted somewhat by holiday spending should be 2.2%.

Quarterly patterns of consumer spending show a staccato pattern in this recovery that has persisted over the past several years: consumers will spend at a higher pace for a quarter (this was the case in the 1st quarter of 2013 with 2.3% growth followed by 1.8% and 1.5% the next two quarters), only to pull back in subsequent quarters to continue repairing their balance sheet. As the recovery progresses and the labor market and housing market continue to improve, we expect that the pace of spending will begin to stabilize at levels of consumption higher than the first four years of the current recovery, but still much lower than in previous recoveries. Average consumption growth in 2014-2017 is expected to reach 2.6% annually and the quarterly pattern of consumer spending should become more stable, staying within a range of 2.3% to 3.2% over those 16 quarters.

INVESTMENT Non-residential fixed investment spending grew at 7.6% in 2011 and 7.3% in 2012. Businesses have been earning record levels of profits, for several years, primarily as a result of cost cutting measures taken during the Great Recession.

When the recession ended and revenues began to climb these lower cost structures translated into soaring profits.

Businesses have been tight fisted and have held onto these profits and as a result retained earnings have seen dramatic growth. In the midst of the financial crisis, retained earnings turned negative for a quarter in 2008 but for the

year averaged nearly $265 billion. Since that time retained earnings have grown substantially and are expected to average over $920 billion annually from 2013-2017. In 2014 retained earnings are forecasted to surpass $1 trillion.

Interest rates are still historically low for those who would seek to borrow to fund investment and are a proxy of the opportunity cost of businesses using their retained earnings for investment spending. But uncertainty has many firms moving forward on investment with great caution. Policy uncertainty, as we have repeatedly discussed, weighs on these forward looking investment decisions. As the economic landscape continues to be obscured by policy uncertainty, businesses remain hesitant to rush forward into that fog. It doesn’t matter if that landscape is a flat plain or a rocky terrain, if businesses had a clearer view of what lay beneath that fog of uncertainty they would be more willing to trek forward across any terrain and pursue more investment projects.

The fog of uncertainty has thickened as we approach the end of 2013. Consequently, investment growth will be just 2.4% in 2013. As the fog of uncertainty begins to lift, spending will accelerate in 2014 with nonresidential investment growing at 4.6%, and expanding at 5.5% in 2015 before rising further to 7.2% in 2016. In 2017 as tightening policy continues to push interest rates upward, investment growth will ease to 5.8%.

Interest rates will remain low over the near term, but they will be rising over the course of our forecast horizon.

The Federal Reserve’s commitment to low interest rates has given way to talk of tapering and the eventual onset of their exit strategy. We think the Fed will begin slowly hiking the federal funds rate mid-2015, but longer run rates will begin to rise earlier as the tapering of QEIII gets underway in spring of 2014. We expect the 10-year Treasury yield to average 4.5% in 2016.

Business spending on equipment and software will grow at an annual average rate of 5.9% in 2013 through 2017.

Investment spending growth in computers and peripherals will continue to be strong after turning negative in 2013.

Companies still wary from the recession and concerned about persistent weakness in the recovery will continue to focus on costs and on making investments that can lower their cost structure. Consequently many will continue implementing productivity boosting IT plans and will spend at a double digit average annual growth rate of 13.5% from 2014 to 2017.

Investment in commercial real estate experienced a burst of activity in 2012. Investment growth in non-residential structures plunged to -25.7% in the 1st quarter of 2013 but bounced back in the 2nd and 3rd quarters. Year-over-year investment in structures, however, will grow just 1.7% in Institute for Economic Competitiveness

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U . S . F orecast 2013. Investment in non-residential structures will slowly accelerate in 2014 and 2015 with growth of 2.0% and 3.2% respectively, before growth jumps to 12.1% in 2016 and pulls back from double digit growth in 2017.

to changes that might offset some of the blunt force cuts of the sequester. Never underestimate the power of upcoming elections to make a politician lose their appetite for austerity in any form.

Investment in transportation equipment grew robustly in 2012 (25.8%), but growth will decelerate sharply in 2013 (0.6%), before accelerating to a 6.2% growth rate in 2014 only to decelerate from that point. This type of investment will have an average growth rate of 2.2% during the three year stretch from 2015 through 2017, and in that final year growth will be 3.2%. Investment in the component is quite volatile due to air craft purchases that can cause wild swings from quarter to quarter.

The combination of higher revenues as the economy continues to grow and somewhat smaller expenditures will help to lower the federal budget deficit to “just” $680 billion for 2013. This is the first time in four years that the deficit did not exceed $1 trillion. We are forecasting that this level of deficits will persist through 2017 as any “grand bargain” will prove illusory and rising interest rates over the course of the forecast horizon will increase the cost of servicing new debt.

Demand driven by replacement need and lower interest rates bolstered light vehicle sales as the recession ended.

Sales will continue to grow from 2012 levels of 14.4 million to a level slightly over 16.3 million in 2017, essentially flat from the previous year.

The national debt is over $17.2 trillion and rising. This represents a debt of nearly $149,945 per taxpayer and over $54,318 per citizen. Unfunded liabilities of the U.S. are even more frightening. Social Security, Medicare part D, and Medicare represent almost $127 trillion in liabilities and that boils down to more than $1.1 million per taxpayer.

Our political inability to address the demographic fiscal time bomb of entitlements does not stop that bomb from ticking.

Residential fixed investment growth spent six years in negative territory, but there are clearly signs of a sustained recovery in a sector that contracted all those years. In 2011, residential fixed investment growth turned positive, but then grew by 12.8% in 2012. It will average 12.5% growth through 2013-2016 with a peak growth rate in 2015 of 14.9%. In the final year of our forecast, 2017, real residential fixed investment will be dampened by higher interest rates and more balance in the housing market that will decelerate the rate of price appreciation. Growth is expected to turn slightly negative at -1.0%. In that year real residential fixed investment will be just over $685 billion, more than $187 billion lower than the 2005 peak during the housing boom.

Inventories of homes for sale have fallen significantly and this has fueled double digit home price appreciation.

Yes housing prices are on the rise again, and the rapid pace of these increases is a function of temporary inventory constraints and investor purchases increasing headwinds should slow the rate of appreciation significantly then the recovery should be sustainable. Housing finance however must become more available if the market is to make a smooth transition from investor led purchases to more traditional mortgage financed consumer purchases.

Rising prices and shrinking inventories have sent the signal to builders to get back to housing production. We expect housing starts to continue to accelerate over the next several years reaching more than 1.57 million in 2017.

GOVERNMENT SPENDING The sequester is underway and these cuts have been a mild drag on the pace of recovery. Discussions to address the budget standoff and avoid another shutdown could lead 10

U.S. Forecast | December 2013

The Simpson-Bowles bipartisan deficit reduction commission report laid out a set of policies that are going to be politically painful and difficult to implement. When will we muster the courage to take these steps?

In 2013, we are forecasting the federal budget deficit to shrink to $680 billion, which will rise to $683 billion in 2014, $668 billion in 2015, $649 billion in 2016, and then up to $721 billion in 2017 as debt servicing costs escalate.

Though we are projecting deficits that are smaller this year, the additional debt added to the national debt over the next four years will exceed $2.7 trillion, thus pushing the national debt total to over $20 trillion. This is assuming interest rates do not rise faster than we are forecasting, and thereby more rapidly raising the burden of servicing all this debt.

NET EXPORTS Most of the United States’ major trading partners are experiencing economic deceleration in 2013 just as the U.S. is itself. In Europe, the Euro zone has continued to contract this year but next year is expected to grow but the pace is so weak that slipping back into contraction in the quarters ahead remains a real possibility. Japan, with extraordinary policies now in place, has recently shown stronger economic growth, but many experts are forecasting weaker growth, as sky high debt levels will necessitate higher tax rates. Real exports are expected to grow by 2.4% in 2013, while real imports will grow at 1.6%. In 2014 real export growth is

U . S . F orecast expected to jump to 4.2% while real import growth will jump to 4.3%, providing a slight drag to overall GDP growth.

Overall export growth continues through the end of our 2017 forecast period. However, real export growth from 2014-2017 is expected to accelerate somewhat, averaging 4.8% while real import growth will average 4.6% over the same time frame.

Real net exports will average -$505 billion 2013-2017, with the trade balance worsening through 2016 before a slight narrowing in 2017.

The U.S. dollar will appreciate vis-à-vis our major trading partners through 2016. The strengthening of the dollar is due to the relative strength of the U.S. recovery (relative is the operative word here) and an upward trend in interest rates. The Euro zone may be emerging from recession but growth will remain paltry in the face of persistent fiscal austerity and continued uncertainty regarding the Euro. Once this discrepancy between global growth rates and the pace of the U.S. recovery narrows, we expect the dollar will begin to depreciate again in 2017 given the large and persistent imbalances in the U.S. economy.

The current account deficit will improve through the end of 2013 continuing the lagged effects of a multi-year depreciation of our currency - excluding a temporary interruption in 2009 as the global search for a safe haven boosted its value. The dollar will then continue on a mutliyear appreciation that began in 2012. Current account balances will average -$462 billion during 2014-2017, with a worsening of the deficit in 2014-2016 in the wake of a four year appreciation of the dollar.

U N E M P LOY M E N T How long will it be before the unemployment rate hits 6.5%, a key level stated by the Fed as far as reversing course on the stance of monetary policy? We are forecasting that it will not be until the third quarter of 2015. How long until unemployment falls to 6.0%? Our projection has that occurring late in the fourth quarter of 2017. Looking beyond this point does not indicate that the unemployment rate will fall below 6.0% for some time – if ever. In this post-Great Recession environment 6.0% may very well be the new level associated with full-employment.

Job creation remains weak, and the pace of payroll job growth is insufficient given that we are still 1.3 million jobs short of payroll employment returning to its previous peak level. The labor market is still suffering through the worst pace of job recovery following a recession since 1945.

a slight improvement of the labor market with 203,000 new workers on business payrolls, after revised increases of 200,000 in October and 175,000 in September.

The mixed message in recent jobs and labor market reports reinforces the need to look at more than a single metric of how the labor market is performing. Because it is complex, nuanced and difficult to measure, the U.S. labor market cannot be sufficiently assessed by a single metric such as the headline unemployment rate during this recovery. This is particularly true because as of November 2013 the labor force participation rate is at its lowest point since April 1978.

Estimates by the Economic Policy Institute of the number of “missing workers,” potential workers who as a result of a weak labor market are not working nor are they looking for work, in the U.S. at more than 5.6 million.

If these workers were actively still looking for work, the current headline unemployment rate would be over 10%.

The Bureau of Labor Statistics (BLS) does have alternative measures of labor market weakness. The broadest measure of unemployment (U-6) takes into account discouraged workers as well as those who are underemployed—working part-time but not by choice— and workers who are marginally attached to the labor force and have looked for work in the past 12 months but are not currently looking, yet indicate a willingness to work.

U-6 remains painfully high at 13.2% in November, down just 1.2% from the November 2012 level of 14.4% but down from its peak of 17.1% in April 2010. U-6 has been in double digits for nearly five and a half years.

As the Affordable Care Act is rolled out over the next couple years, we must pay close attention to this broader measure of unemployment. If companies alter their approach to managing labor resources and make a shift such that they employ fewer full-time workers and more part-time workers in order to avoid either having to provide healthcare insurance, at what will likely be higher premiums, or paying fines for not providing it.

In this scenario, headline unemployment could go down if full time jobs are split into two part-time jobs, and payroll employment will go up (full-time and part-time jobs are treated equally in the payroll employment data).

U-6 would reflect the rise in underemployment in this scenario by its inclusion of those underemployed workers not captured in the headline rate.

The national unemployment rate ticked down in November to 7.0%. The November jobs report again showed Institute for Economic Competitiveness

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utomobile and Light Truck Sales December 2013 (Millions Vehicles)

CHARTS

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Auto Sales Light Truck Sales

F O R E C A S T F O R T H E N AT I O N

U . S . F orecast C harts

30-Year Mortgage Rates and Housing Starts 9.0

(Mortgage rates - Left axis, %)

2.5

8.0

2.0

7.0

1.5

6.0

1.0

5.0

0.5

4.0 3.0

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 30-Year Fixed Mortgage Rate Housing Starts - Millions

0.0

Automobile and Light Truck Sales 11.0

(Millions Vehicles)

10.0 9.0 8.0 7.0 6.0 5.0 4.0

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Auto Sales Light Truck Sales

Change in Real Business Inventories 150.0 100.0 50.0 0.0 -50.0 -100.0 -150.0 -200.0 -250.0

(Billions of 2000 Dollars)

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Change in Real Business Inventories Institute for Economic Competitiveness

13

U . S . F orecast C harts

Consumer Prices (% Change Year Ago)

6.0 4.0 2.0 0.0 -2.0

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Consumer Price Index Core Consumer Price Index

Federal Budget Surplus 500.0

(Billions of Dollars)

0.0 -500.0 -1000.0 -1500.0

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Federal Budget Surplus

Federal Funds Rate 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 -1.0

14

U.S. Forecast | December 2013

(%)

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Fed Funds Rate

U . S . F orecast C harts

Real GDP Growth and Federal Funds Rate (%)

10.0 5.0 0.0 -5.0 -10.0

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Quarterly Growth Rate Real GDP Fed Funds Rate

Industrial Production 115.0

(2002=100)

110.0 105.0 100.0 95.0 90.0 85.0 80.0

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Industrial Production

Private Fixed Nonresidential Investment 2800.0 2600.0 2400.0 2200.0 2000.0 1800.0 1600.0 1400.0 1200.0

(Billions of Dollars)

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Private Fixed Nonresidential Investment Institute for Economic Competitiveness

15

U . S . F orecast C harts

Manufacturing Employment 18.0

(Millions)

17.0 16.0 15.0 14.0 13.0 12.0 11.0

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Manufacturing Employment

Money Supply

3000.0

(Annual Growth Rate %)

2500.0 2000.0 1500.0 1000.0

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Annual Growth Rate of M1

Total Nonfarm Payroll Employment 145.0

(Millions)

140.0 135.0 130.0 125.0

16

U.S. Forecast | December 2013

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Total Nonfarm Employment

U . S . F orecast C harts

Oil and Consumer Confidence 140.0

Oil ($ Per Barrel) - Left Axis

120

120.0

110

100.0

100

80.0

90

60.0

80

40.0

70

20.0

60

0.0

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Price of Oil WTI Consumer Sentiment

50

Real Disposable Income and Consumption 6.0

(% Change Year Ago)

4.0 2.0 0.0 -2.0 -4.0

-200

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Real Disposable Income Consumption

Trade Balance and Real Exchange Rate

-300 -400 -500 -600

1.50 1.40 1.30 1.20 1.10

-700 -800

1.00 0.90 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Trade Balance (Billions $) Left axis U.S. Dollar Real Exchange Rate (2000 = 1.0) Right axis

0.80

Institute for Economic Competitiveness

17

U . S . F orecast C harts

Twin Deficits 500.0

(Billions of Dollars)

0.0 -500.0 -1000.0 -1500.0

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 U.S. Federal Budget Surplus Current Account

Civilian Unemployment Rate 10.0

(%)

9.0 8.0 7.0 6.0 5.0 4.0 3.0

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Unemployment Rate

Yield Curve 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0

18

U.S. Forecast | December 2013

(%)

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 1-Year T-Bill Yield 5 Year Treasury Bond Yield 30 year Treasury Bond Yield

U . S . F orecast T ables Table 1. Annual Summary of the Long-Term Forecast of the U.S.

Table 1. Summary of the Long-Term Forecast of the U.S.

Gross Domestic Product Final Sales of Domestic Product Total Consumption Durables Nondurables Services Nonresidential Fixed Investment Equipment & Software Information Processing Equipment Computers & Peripherals Communications Equipment Industrial Equipment Transportation Equipment Aircraft Other Equipment Structures Commercial & Health Care Manufacturing Power & Communication Mining & Petroleum Other Residential Fixed Investment Exports Imports Federal Government State & Local Government

Real GDP Nominal GDP

GDP Deflator Consumer Prices Excl. Food & Energy Producer Prices, Finished Goods Employment Cost Index - Total Comp.

Oil - WTI ($ per barrel) Productivity (% change) Industrial Production (% change) Factory Operating Rate Nonfarm Inven. Chg. (Bil. of 2005 $) Consumer Sentiment Index Light Vehicle Sales (Million units) Housing Starts (Million units) Existing House Sales (Million units) Unemployment Rate (%) Payroll Employment (% change) Federal Surplus (Unified, FY, bil. $) Current Account Balance (Bil. $)

Federal Funds Rate (%) 3-Month Treasury Bill Rate (%) 1-Year Treasury Note Yield (%) 5-Year Treasury Note Yield (%) 10-Year Treasury Note Yield (%) 30-Year Treasury Note Yield (%) 30-Year Fixed Mortgage Rate (%) S&P 500 Stock Index (% change) Exchange Rate, Major Trading Partners (% change (negative = depreciation))

Personal Income (Bil. of $) (% change) Disposable Income (Bil. of $) (% change) Real Disposable Income (Bil. Of 2005 $) (% change) Saving Rate (%) After-Tax Profits (Billions of $) (% change)

2007

2008

2009

2010

2011

2012

2013

2014

1.8 2.0 2.3 4.6 1.7 2.0 5.9 3.2 11.5 13.2 13.1 3.1 -2.8 28.3 -15.6 12.7 10.0 18.1 39.0 -1.6 15.0 -18.9 8.9 2.3 1.7 1.5

-0.3 0.2 -0.4 -5.1 -1.1 0.8 -0.6 -6.9 0.7 6.3 -4.5 -4.7 -22.9 -0.8 -11.0 6.4 -3.6 25.9 11.8 7.3 13.2 -24.0 5.9 -2.7 6.8 0.3

-2.8 -2.0 -1.6 -5.3 -1.8 -0.8 -15.5 -22.5 -8.3 0.7 -12.7 -22.2 -49.0 -40.0 -27.4 -18.9 -30.9 5.2 1.6 -27.7 -18.3 -20.7 -8.9 -13.5 5.7 1.6

2.5 1.0 2.0 6.1 2.2 1.2 2.6 15.9 10.0 11.2 13.6 -0.2 80.2 26.9 17.4 -15.7 -24.1 -27.7 -15.9 21.7 -26.3 -2.4 11.5 12.8 4.4 -2.7

1.8 2.0 2.5 6.6 1.9 2.1 7.5 12.8 2.3 -1.3 2.6 15.7 36.0 14.4 35.9 2.1 -0.2 -1.5 -7.7 24.3 -7.3 0.6 7.1 4.9 -2.6 -3.6

2.8 2.6 2.2 7.7 1.4 1.6 7.4 7.7 2.7 5.6 9.0 5.7 25.8 31.5 16.5 13.0 8.0 16.4 18.9 14.5 8.0 12.8 3.6 2.2 -1.4 -0.7

1.7 1.6 1.9 7.1 2.0 1.0 2.4 2.6 3.2 -2.8 10.2 4.2 0.6 -11.3 -6.8 1.7 1.8 3.3 -5.2 6.0 3.2 13.6 2.4 1.6 -4.6 -0.2

2.3 2.5 2.3 5.3 2.2 1.8 4.6 6.7 9.6 5.3 11.8 8.8 6.2 3.9 -0.9 2.0 6.6 0.9 2.5 -2.1 4.1 13.7 4.2 4.3 0.4 0.2

14876.8 14833.6 14417.9 14779.4 15052.4 15470.7 15727.7 14480.4 14720.3 14418.0 14958.3 15533.8 16244.6 16754.6

2.7 2.9 2.3 3.9 3.1

1.9 3.8 2.3 6.4 2.9

0.8 -0.3 1.7 -2.5 1.5

1.2 1.6 1.0 4.2 1.9

2.0 3.1 1.7 6.0 2.2

72.3 1.4 2.5 78.6 36.5 85.6 16.089 1.342 4.418 4.6 1.1 -162 -713

99.6 1.0 -3.4 74.5 -35.0 63.8 13.195 0.900 3.655 5.8 -0.6 -455 -681

61.7 3.2 -11.2 65.7 -146.0 66.3 10.402 0.554 3.868 9.3 -4.4 -1416 -382

79.4 3.3 5.7 71.3 65.9 71.8 11.555 0.586 3.705 9.6 -0.7 -1294 -449

5.02 4.35 4.52 4.43 4.63 4.84 6.34 1477 12.8 1.004 -5.6

1.93 1.37 1.82 2.80 3.67 4.28 6.04 1221 -17.2 0.959 -4.1

0.16 0.15 0.47 2.19 3.26 4.07 5.04 947 -18.9 1.000 4.8

0.18 0.14 0.32 1.93 3.21 4.25 4.69 1139 21.6 0.970 -2.8

0.10 0.05 0.18 1.52 2.79 3.91 4.46 1269 11.5 0.912 -5.8

11996 5.3 10508 4.7 10822 2.1 3.0 1303 -5.4

12431 3.6 10995 4.6 10989 1.5 5.0 1073 -17.5

12082 -2.8 10937 -0.5 10937 -0.5 6.1 1199 22.2

12435 2.9 11244 2.8 11061 1.1 5.6 1464 23.4

13191 6.1 11787 4.8 11325 2.4 5.7 1473 0.6

Forecast 2015 2016

2.8 2.7 2.6 5.4 2.0 2.4 5.5 7.4 11.9 19.0 8.5 6.9 1.4 4.1 -1.0 3.2 16.3 5.2 -5.9 -5.2 9.3 14.9 4.4 5.3 -0.6 0.5

2.9 3.0 2.7 4.9 2.2 2.5 7.2 6.8 10.6 16.2 10.0 4.4 2.7 6.2 -1.9 12.1 24.7 10.9 -2.4 9.5 11.7 7.7 5.2 4.7 -1.1 0.7

2017

2.8 2.8 2.8 4.4 2.4 2.8 5.8 6.0 8.4 13.7 7.0 4.2 3.2 5.3 0.8 7.3 16.1 6.1 7.4 -2.3 6.3 -1.0 5.3 3.9 -0.6 1.0

16088.6 16537.5 17020.9 17491.3 17404.7 18191.6 19028.7 19840.1

1.7 2.1 2.1 1.9 1.9

1.4 1.4 1.8 1.3 1.9

1.6 1.4 1.9 0.7 2.4

1.7 1.7 1.9 1.0 2.5

1.6 1.8 1.8 1.3 2.7

1.5 1.6 1.7 0.9 2.6

95.1 94.2 0.5 1.5 3.4 3.6 74.0 75.8 39.7 68.7 67.4 76.5 12.735 14.4 0.612 0.8 3.793 4.1 8.9 8.1 1.2 1.7 -1297 -1089.2 -458 -440.4

97.6 0.3 2.4 76.1 44.9 78.4 15.5 0.9 4.5 7.5 1.6 -680.3 -400.3

98.6 0.7 2.4 76.5 38.0 77.5 15.6 1.1 4.8 7.0 1.5 -683.5 -396.2

95.3 1.0 3.0 77.4 54.2 83.5 15.9 1.4 5.0 6.6 1.6 -668.1 -440.2

93.4 1.5 2.9 77.4 44.0 84.2 16.2 1.6 5.0 6.3 1.6 -648.9 -483.5

95.0 1.7 2.1 76.7 37.8 83.7 16.2 1.6 4.7 6.1 1.3 -720.5 -529.1

0.1 0.1 0.2 0.8 1.8 2.9 3.7 1380 8.9 0.9 3.8

0.1 0.1 0.1 1.1 2.3 3.4 4.0 1634 18.4 1.0 3.1

0.1 0.1 0.1 1.6 2.9 3.9 4.6 1748 7.3 1.0 0.3

0.4 0.4 0.6 1.9 3.2 4.2 4.9 1747 -0.1 1.0 2.1

2.2 2.2 2.6 3.2 3.8 4.6 5.7 1739 -0.5 1.0 0.1

3.8 3.6 3.8 4.3 4.5 4.8 6.5 1727 -0.7 1.0 -0.2

13744 4.2 12246 3.9 11552 2.0 5.6 1755 19.2

14133 2.8 12473 1.9 11637 0.7 4.6 1806 2.9

14768 4.5 13032 4.5 12004 3.2 5.3 1930 6.9

15433 4.5 13627 4.6 12367 3.0 5.6 1900 -1.6

16177 4.8 14310 5.0 12783 3.4 6.1 1874 -1.3

16973 4.9 15037 5.1 13234 3.5 6.5 1848 -1.4

Institute for Economic Competitiveness

19

U . S . F orecast T ables Table 2. Real Gross Domestic Product

Table 2. Real Gross Domestic Product History 2007

2008

2009

2010

Forecast 2011

2012

2013

2014

2015

2016

2017

Real GDP Billions 2005 $ Gross Domestic Product

14876.8 14833.6 14417.9 14779.4 15052.4 15470.7 15727.7

16088.6 16537.5 17020.9 17491.3

14839.3 14868.9 14565.5 14717.7 15014.4 15403.2 15653.1

16038.6 16476.7 16970.5 17447.0

10035.5

9999.2

9842.9 10035.9 10291.3 10517.6 10714.9

10960.1 11245.1 11550.1 11881.0

Durables

1141.7

1083.2

1023.3

1085.7

1157.1

1246.7

1335.7

1406.6

1482.3

1554.9

1623.8

Nondurables

2239.3

2214.7

2175.1

2223.5

2266.0

2296.8

2341.8

2394.2

2441.7

2496.0

2554.9

Services

6650.4

6700.6

6644.5

6727.2

6871.1

6982.7

7052.9

7180.4

7349.3

7534.2

7743.6

1948.4

1934.5

1633.5

1673.8

1800.4

1931.8

1978.3

2069.0

2182.3

2340.5

2475.2

898.3

836.1

644.3

746.7

841.7

905.9

929.1

991.8

1064.8

1137.0

1205.3

279.9

281.0

256.1

281.4

287.9

295.7

305.1

334.3

374.1

413.6

448.3

Computers & Peripherals

72.8

77.1

76.8

84.7

83.4

87.9

85.2

89.6

106.6

123.8

140.6

Communications Equipment

96.2

91.5

79.4

90.2

92.3

100.6

110.6

123.6

134.1

147.5

157.7

Industrial Equipment

205.3

195.5

152.1

151.3

175.0

184.6

192.3

209.2

223.6

233.5

243.2

Transportation Equipment

188.8

146.2

70.6

127.5

171.8

214.4

215.6

228.9

232.2

238.5

246.2

30.2

30.0

17.7

22.1

24.5

32.0

28.1

29.1

30.3

32.2

33.9

48.1

42.6

30.8

36.2

49.2

56.6

52.5

52.1

51.5

50.6

51.0

509.0

540.2

438.2

366.3

374.1

421.6

428.7

436.8

450.7

505.1

542.0

189.9

182.8

126.7

95.2

94.8

102.3

104.2

111.0

129.2

161.1

186.6

Manufacturing

43.1

53.8

56.3

40.8

39.1

45.0

46.5

46.9

49.3

54.7

58.0

Power & Communication

85.9

94.5

95.8

80.4

74.1

88.0

83.1

84.9

79.9

77.9

83.7

Mining & Petroleum

97.9

105.0

75.0

87.8

109.0

124.1

131.5

128.3

121.4

133.0

129.9

Other

91.8

103.4

84.5

62.0

57.3

61.9

63.9

66.4

72.6

81.1

86.1

654.8

497.7

392.3

382.4

384.3

433.8

492.8

560.7

643.8

692.3

685.1

Exports

1647.3

1741.8

1583.8

1765.6

1890.6

1957.5

2004.2

2087.9

2180.7

2294.8

2416.9

Imports

2350.9

2288.7

1976.0

2228.1

2336.4

2388.2

2425.7

2531.0

2666.2

2791.7

2901.4

Federal Government

1078.7

1152.3

1217.7

1270.7

1237.9

1220.3

1163.5

1167.6

1161.1

1147.9

1141.4

State & Local Government

1836.2

1842.5

1871.4

1820.8

1754.5

1742.8

1738.8

1741.4

1750.8

1762.2

1779.3

Final Sales of Domestic Product Total Consumption

Nonresidential Fixed Investment Equipment & Software Information Processing Equipment

Aircraft Other Equipment Structures Commercial & Health

Residential Fixed Investment

20

U.S. Forecast | December 2013

U . S . F orecast T ables Table 3. Quarterly Summary of the Forecast of the U.S.

Table 3. Quarterly Summary of the Forecast of the U.S. 2013Q3

Gross Domestic Product Final Sales of Domestic Product Total Consumption Durables Nondurables Services Nonresidential Fixed Investment Equipment & Software Information Processing Equipment Computers & Peripherals Communications Equipment Industrial Equipment Transportation Equipment Aircraft Other Equipment Structures Commercial & Health Care Manufacturing Power & Communication Mining & Petroleum Other Residential Fixed Investment Exports Imports Federal Government State & Local Government

Real GDP Nominal GDP

GDP Deflator Consumer Prices Excl. Food & Energy Producer Prices, Finished Goods Employment Cost Index - Total Comp.

2.8 2.0 1.5 7.8 2.7 0.1 1.6 -3.7 -3.8 -1.9 -13.6 17.3 -1.1 -30.4 -0.3 12.3 12.4 38.0 17.2 10.4 -5.6 14.6 4.6 1.8 -1.7 1.5

2013Q4

1.7 1.8 2.2 5.8 3.3 1.3 7.2 9.8 8.0 -3.4 12.6 7.0 16.3 54.0 -7.7 7.1 5.3 3.2 8.1 10.9 3.6 4.0 3.3 4.9 -4.5 0.0

2014Q1

2.2 2.8 2.3 2.9 1.3 2.5 4.5 9.2 13.3 4.6 17.9 9.6 7.9 2.7 -3.4 -3.6 6.6 -12.2 -7.4 -6.9 -0.1 14.3 3.5 3.0 4.4 -0.4

2014Q2

2.3 2.8 2.6 5.5 2.2 2.2 4.9 8.9 13.2 12.5 14.1 8.6 5.9 1.2 2.6 -1.6 8.3 7.4 -1.8 -14.1 5.3 18.7 4.6 5.9 1.8 0.1

2014Q3

2.4 2.8 2.8 5.6 2.4 2.4 3.8 7.5 12.5 19.6 9.1 8.6 2.0 5.3 4.3 -4.1 5.7 -2.5 -3.3 -15.9 3.6 19.8 3.9 5.0 1.8 -0.4

2014Q4

2015Q2

2015Q3

2015Q4

2016Q1

Composition of Real GDP, Percent Change, Annual Rate 2.8 2.9 3.0 3.0 2.8 2.8 2.5 2.6 2.8 3.0 2.8 3.1 2.7 2.5 2.5 2.6 2.5 2.9 6.4 4.4 5.3 5.8 5.4 5.2 2.1 1.9 1.7 2.0 1.9 2.5 2.3 2.4 2.3 2.3 2.2 2.6 3.6 6.0 6.3 7.1 7.1 7.3 5.4 8.2 7.7 7.5 6.8 5.7 11.1 12.4 11.5 11.7 11.4 10.2 22.0 18.9 19.5 17.6 16.7 15.1 6.6 7.7 7.7 9.7 10.4 10.9 5.9 8.4 6.0 5.4 5.2 4.0 -4.3 2.7 3.0 2.6 1.8 -1.2 1.0 4.8 4.5 5.5 7.9 4.8 -7.7 -5.8 2.4 8.7 -3.2 -18.7 -1.1 3.8 6.1 10.1 11.6 14.4 8.8 19.9 18.9 27.7 24.8 26.5 -3.2 4.4 15.7 9.2 9.5 13.5 -7.8 -8.5 -5.6 -3.6 -4.6 -4.5 -8.3 -3.7 -3.2 2.6 9.0 15.3 8.6 9.3 11.5 12.5 14.3 13.9 13.2 12.5 16.6 14.7 11.0 7.6 4.0 4.3 4.5 5.4 4.9 4.6 4.8 5.4 5.8 5.7 5.1 4.1 -1.5 -0.4 -1.4 -1.4 -1.1 -1.5 0.9 0.6 0.8 0.6 0.6 0.5

2016Q2

3.0 3.1 2.7 4.0 2.3 2.6 8.0 7.1 10.4 16.2 10.6 3.0 6.2 7.4 12.1 14.9 25.1 9.7 1.3 18.5 8.9 3.7 6.0 4.3 -0.8 0.7

2016Q3

3.1 3.0 2.8 3.9 2.4 2.7 7.3 7.4 9.5 14.8 9.3 3.8 6.8 6.6 7.4 11.0 21.5 12.3 0.2 6.5 9.2 1.3 6.0 4.5 -0.8 0.8

2016Q4

3.0 3.0 3.1 5.0 2.5 3.0 6.3 6.7 8.9 15.0 7.5 5.5 2.8 5.4 -5.8 7.9 22.0 3.7 3.2 -3.1 6.7 0.4 5.5 4.5 -0.8 0.9

2017Q1

2.4 2.6 2.6 3.9 2.1 2.5 4.9 5.6 7.8 12.4 6.2 5.6 0.9 4.0 -12.6 4.3 14.9 1.0 11.5 -11.8 5.1 -1.1 5.2 3.3 -0.4 1.0

2017Q2

2.6 2.7 2.9 4.6 2.4 2.8 5.3 5.5 8.0 14.2 5.6 3.7 3.1 5.1 12.4 6.6 14.1 10.0 12.7 -8.0 5.9 -3.2 5.0 4.0 -0.5 1.1

Billions of Dollars 15790.1 15857.1 15943.9 16036.2 16132.1 16242.3 16357.4 16477.2 16600.2 16715.2 16829.4 16955.6 17084.9 17213.7 17316.9 17429.7 16857.6 16964.6 17130.3 17312.6 17494.5 17681.3 17889.1 18089.3 18296.2 18491.9 18707.7 18923.3 19136.3 19347.6 19542.4 19737.2 Prices & Wages, Percent Change, Annual Rate 1.5 1.9 1.5 1.6 1.5 1.5 1.6 1.6 1.8 1.7 1.8 1.9 1.8 1.8 1.8 0.5 0.9 1.2 1.6 1.7 2.2 2.7 2.5 2.6 2.7

1.9 2.6 1.8 3.6 1.9

1.2 0.4 1.4 -0.1 2.1

1.7 1.4 1.9 0.5 2.9

1.9 2.0 2.4 0.8 2.4

1.8 1.6 2.1 0.4 2.5

105.8 2.3 2.3 76.0 59.2 81.6 15.660 0.894 4.730 7.3 1.4 -799 -383

98.2 -0.9 3.5 76.1 65.7 73.5 15.699 0.934 4.518 7.2 1.6 -684 -403

99.3 0.9 2.0 76.3 47.1 73.7 15.573 1.006 4.555 7.1 1.5 -751 -392

99.5 0.5 2.0 76.4 38.7 76.9 15.577 1.080 4.662 7.0 1.5 -749 -392

98.0 0.6 2.4 76.4 27.1 79.0 15.643 1.138 4.954 6.9 1.5 -732 -394

97.5 1.0 3.4 76.8 39.2 80.2 15.699 1.210 4.980 6.8 1.5 -726 -407

Federal Funds Rate (%) 3-Month Treasury Bill Rate (%) 1-Year Treasury Note Yield (%) 5-Year Treasury Note Yield (%) 10-Year Treasury Note Yield (%) 30-Year Treasury Note Yield (%) 30-Year Fixed Mortgage Rate (%) S&P 500 Stock Index (% change) Exchange Rate, Major Trading Partners (%change (negative = depreciation))

0.08 0.03 0.12 1.51 2.71 3.72 4.44 1675 17.3 0.987 0.3

0.09 0.04 0.11 1.35 2.60 3.65 4.20 1738 15.8 0.966 -8.1

0.10 0.05 0.13 1.52 2.76 3.78 4.38 1746 1.8 0.966 0.0

0.15 0.06 0.14 1.64 2.91 3.93 4.55 1748 0.6 0.976 4.0

0.16 0.06 0.14 1.66 2.98 3.96 4.65 1749 0.2 0.982 2.7

0.16 0.06 0.13 1.68 3.02 4.03 4.68 1750 0.2 0.988 2.5

Personal Income (Bil. of $) (% change) Disposable Income (Bil. of $) (% change) Real Disposable Income (Bil. of 2005 $) (% change) Saving Rate (%) After-Tax Profits (Billions of $) (% change)

14198 3.8 12538 4.5 11675 2.5 4.7 1849 6.1

14343 4.1 12658 3.9 11766 3.2 4.9 1770 -16.0

14538 5.6 12826 5.4 11884 4.0 5.3 1899 32.4

14686 4.1 12961 4.3 11959 2.6 5.3 1938 8.5

14846 4.4 13097 4.3 12040 2.7 5.2 1939 0.2

15003 4.3 13243 4.5 12133 3.1 5.3 1945 1.3

Oil - WTI ($ per barrel) Productivity (% change) Industrial Production (% change) Factory Operating Rate Nonfarm Inven. Chg. (Bil. of 2005 $) Consumer Sentiment Index Light Vehicle Sales (Million units) Housing Starts (Million units) Existing House Sales (Million units) Unemployment Rate (%) Payroll Employment (% change) Federal Surplus (NIPA Bil. $) Current Account Balance (Bil. $)

2015Q1

1.9 2.1 1.9 2.3 2.9

1.6 1.7 1.8 0.8 2.7

1.4 1.5 1.8 0.1 2.7

1.4 1.6 1.7 0.3 2.7

1.6 1.6 1.8 1.0 2.7

1.4 1.7 1.6 1.3 2.6

Other Key Measures 96.3 94.9 94.4 95.5 1.0 1.2 1.3 1.2 3.4 3.0 2.7 2.4 77.2 77.4 77.6 77.5 47.7 56.0 57.2 55.8 81.0 83.5 84.6 84.8 15.769 15.851 15.943 16.091 1.293 1.383 1.480 1.520 4.908 4.988 5.079 5.074 6.7 6.6 6.5 6.4 1.6 1.5 1.5 1.7 -723 -709 -693 -727 -419 -432 -447 -464

94.7 1.4 3.2 77.2 43.9 84.5 16.192 1.544 5.097 6.4 1.5 -728 -473

93.3 1.7 3.1 77.3 41.0 83.9 16.235 1.563 4.963 6.3 1.7 -735 -473

92.4 1.8 2.8 77.4 44.8 83.9 16.241 1.580 4.897 6.2 1.6 -741 -485

93.1 1.8 2.4 77.5 46.3 84.5 16.271 1.584 4.887 6.2 1.6 -762 -503

93.7 1.4 1.9 77.1 39.1 83.7 16.256 1.583 4.789 6.1 1.2 -774 -513

94.6 1.7 1.8 76.9 38.1 83.5 16.257 1.565 4.675 6.1 1.2 -806 -527

Financial Markets, NSA 0.16 0.16 0.29 0.89 0.06 0.12 0.41 0.94 0.13 0.27 0.77 1.30 1.72 1.80 1.92 2.18 3.11 3.17 3.24 3.41 4.09 4.13 4.21 4.31 4.76 4.84 4.93 5.17 1751 1749 1744 1742 0.2 -0.4 -1.1 -0.5 0.993 0.999 1.001 1.001 2.0 2.4 0.5 0.2

1.36 1.40 1.81 2.57 3.60 4.46 5.39 1742 0.1 1.001 -0.1

1.88 1.91 2.32 2.98 3.72 4.58 5.59 1742 -0.2 1.000 -0.3

2.42 2.41 2.82 3.39 3.87 4.65 5.78 1737 -1.1 0.998 -0.7

2.96 2.90 3.28 3.75 4.01 4.69 6.01 1733 -0.9 0.999 0.3

3.46 3.33 3.67 4.09 4.25 4.72 6.28 1730 -0.8 0.998 -0.4

3.86 3.64 3.89 4.30 4.46 4.76 6.52 1727 -0.6 0.998 -0.1

Incomes 15354 15509 4.1 4.1 13551 13701 4.3 4.5 12324 12411 2.8 2.9 5.6 5.6 1897 1912 5.5 3.4

15898 5.9 14050 6.0 12621 4.1 5.9 1856 -12.4

16081 4.7 14215 4.8 12720 3.2 6.0 1873 3.7

16266 4.7 14395 5.1 12835 3.6 6.1 1877 1.0

16462 4.9 14582 5.3 12954 3.8 6.3 1890 2.8

16684 5.5 14756 4.9 13059 3.3 6.4 1836 -11.0

16881 4.8 14944 5.2 13177 3.7 6.5 1842 1.3

15199 5.3 13409 5.1 12239 3.5 5.5 1871 -14.3

15672 4.3 13848 4.4 12495 2.7 5.7 1918 1.2

Institute for Economic Competitiveness

21

U . S . F orecast T ables Table 4. Quarterly Gross Domestic Product

Table 4. Quarterly Gross Domestic Product

2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2

Real GDP Billions 2005 $ Gross Domestic Product Final Sales of Domestic Product Total Consumption Durables

15790.1 15857.1 15943.9 16036.2 16132.1 16242.3 16357.4 16477.2 16600.2 16715.2 16829.4 16955.6 17084.9 17213.7 17316.9 17429.7 15694.5 15765.1 15875.9 15984.8 16096.6 16197.2 16303.4 16414.5 16536.3 16652.6 16779.1 16908.4 17033.7 17160.9 17271.5 17385.1 10732.3 10791.4 10852.4 10921.3 10996.3 11070.4 11138.9 11208.5 11281.7 11351.2 11431.4 11507.0 11586.2 11675.7 11750.2 11835.2

1348.5 1367.6 1377.5 1396.1 1415.4 1437.3 1452.8 1471.7 1492.6 1512.3 1531.4 1546.6 1561.3 1580.4 1595.4 1613.6

Nondurables

2347.1 2366.4 2374.2 2387.4 2401.5 2413.9 2425.0 2435.3 2447.4 2459.1 2474.2 2488.2 2503.2 2518.6 2532.0 2546.9

Services

7053.4 7075.4 7119.4 7158.0 7201.3 7243.1 7286.3 7328.6 7370.9 7411.3 7459.0 7506.6 7557.2 7614.0 7661.3 7714.9

Nonresidential Fixed Investment Equipment & Software Information Processing Equipment Computers & Peripherals Communications Equipment

1979.2 2013.9 2036.2 2060.9 2080.1 2098.6 2129.7 2162.3 2199.5 2237.7 2277.4 2321.8 2363.2 2399.5 2428.5 2459.9 921.2

942.9

964.0

984.6 1002.6 1015.9 1036.2 1055.5 1074.8 1092.7 1107.8 1127.1 1147.2 1166.0 1182.1 1198.1

303.8

309.8

319.6

329.7

339.5

348.5

358.9

368.8

379.2

389.6

399.2

409.2

418.5

427.6

435.7

444.2

84.3

83.6

84.5

87.1

91.0

95.7

99.9

104.5

108.8

113.1

117.1

121.6

125.9

130.4

134.2

138.8

110.6

114.0

118.8

122.8

125.5

127.5

129.9

132.3

135.4

138.8

142.4

146.0

149.3

152.1

154.3

156.5

Industrial Equipment

195.2

198.5

203.1

207.3

211.6

214.7

219.1

222.3

225.2

228.1

230.3

232.0

234.2

237.4

240.6

242.8

Transportation Equipment

214.0

222.3

226.5

229.8

230.9

228.4

229.9

231.7

233.2

234.2

233.5

237.0

240.9

242.6

243.1

245.0

25.7

28.7

28.8

28.9

29.3

29.4

29.7

30.1

30.5

31.0

31.4

32.0

32.5

32.9

33.2

33.7

53.3

52.3

51.8

52.1

52.7

51.6

50.9

51.2

52.3

51.8

49.2

50.6

51.6

50.8

49.1

50.6

437.3

444.9

440.8

439.0

434.4

433.2

437.2

443.8

454.6

467.3

483.3

500.3

513.6

523.4

528.9

537.5

105.0

106.3

108.1

110.2

111.8

114.2

119.5

124.7

132.6

140.2

148.6

157.2

165.0

173.4

179.5

185.5

47.7

48.0

46.5

47.3

47.0

46.7

47.2

48.9

50.0

51.1

52.8

54.0

55.6

56.1

56.3

57.6

Aircraft Other Equipment Structures Commercial & Health Manufacturing Power & Communication Mining & Petroleum Other Residential Fixed Investment

85.9

87.6

86.0

85.6

84.8

83.1

81.3

80.2

79.4

78.5

77.6

77.8

77.9

78.5

80.6

83.1

134.4

137.9

135.5

130.5

124.9

122.3

121.1

120.2

120.9

123.6

128.0

133.6

135.7

134.6

130.5

127.8

64.6

65.2

65.1

66.0

66.6

68.0

69.5

71.4

73.6

76.1

78.6

80.3

82.1

83.4

84.4

85.7

504.0

508.9

526.3

549.3

574.6

592.7

610.5

634.4

656.6

674.0

686.4

692.6

694.8

695.4

693.6

687.9

Exports

2020.8 2037.2 2055.0 2078.5 2098.5 2119.4 2141.8 2165.7 2194.3 2220.8 2245.8 2278.6 2311.8 2343.1 2372.9 2401.9

Imports

2434.0 2463.1 2481.3 2517.1 2547.8 2577.7 2611.6 2648.6 2685.5 2719.3 2746.7 2775.9 2806.5 2837.8 2861.0 2888.9

Federal Government

1163.2 1149.8 1162.3 1167.4 1172.7 1168.1 1167.0 1162.8 1158.8 1155.7 1151.4 1149.0 1146.8 1144.6 1143.5 1142.0

State & Local Government

1742.5 1742.5 1740.8 1741.5 1739.8 1743.7 1746.3 1749.7 1752.3 1754.8 1757.0 1760.3 1763.7 1767.8 1772.2 1777.0

22

U.S. Forecast | December 2013

U . S . F orecast T ables Table 5. Annual Employment

Table 5. Annual Employment 2007

2008

History 2009 2010

2011

2012

2013

2014

Forecast 2015 2016

2017

Millions Total Nonfarm Employment

137.64

136.85

130.86

129.91

131.50

133.74

135.91

137.97

140.11

142.35

144.23

Private Nonfarm

115.42

114.35

108.31

107.42

109.41

111.82

114.06

116.01

118.04

120.19

121.93

Mining

0.66

0.71

0.64

0.65

0.74

0.80

0.82

0.84

0.84

0.87

0.88

Construction

7.63

7.16

6.02

5.52

5.53

5.64

5.81

6.04

6.55

7.14

7.54

Manufacturing

13.88

13.40

11.85

11.53

11.73

11.92

11.98

12.20

12.37

12.44

12.43

Trade, Transportation and Utilities

26.63

26.29

24.90

24.64

25.07

25.51

25.97

26.26

26.49

26.80

27.07

Transportation & Warehousing

4.54

4.51

4.24

4.19

4.30

4.41

4.47

4.55

4.70

4.86

5.02

Financial Activities

8.35

8.20

7.84

7.70

7.70

7.79

7.89

7.89

7.87

7.83

7.74

Education & Health

18.32

18.84

19.19

19.53

19.89

20.32

20.68

20.94

21.21

21.68

22.12

Professional & Business Services

17.95

17.74

16.58

16.72

17.33

17.93

18.54

19.15

19.88

20.45

20.89

3.03

2.98

2.80

2.71

2.67

2.68

2.69

2.69

2.68

2.74

2.80

Leisure & Hospitality

13.43

13.44

13.07

13.04

13.35

13.75

14.16

14.43

14.60

14.72

14.92

Government

22.22

22.50

22.55

22.49

22.09

21.91

21.85

21.96

22.07

22.17

22.30

2.74

2.76

2.83

2.98

2.86

2.82

2.75

2.80

2.78

2.73

2.70

19.48

19.74

19.72

19.51

19.23

19.10

19.11

19.16

19.29

19.44

19.60

Information

Federal State & Local

Growth Rates Total Nonfarm Employment

1.11

-0.57

-4.38

-0.71

1.22

1.70

1.63

1.52

1.55

1.60

1.32

Private Nonfarm

1.11

-0.93

-5.28

-0.80

1.85

2.21

2.00

1.71

1.75

1.82

1.45

Mining

5.74

6.77

-14.53

11.65

13.45

3.27

4.71

0.29

1.17

3.00

0.88

Construction

-1.95

-9.21

-16.57

-3.46

1.84

1.62

3.12

5.97

9.42

8.09

4.05

Manufacturing

-2.05

-5.36

-11.40

0.60

1.77

1.38

0.51

2.37

1.11

0.16

-0.30

Trade, Transportation and Utilities

1.17

-3.31

-4.74

0.70

1.98

1.83

1.76

0.74

0.96

1.18

0.84

Transportation & Warehousing

0.89

-2.70

-5.70

1.56

2.44

2.86

0.69

2.34

3.44

3.54

2.91

Financial Activities

-1.16

-2.31

-4.30

-0.89

0.50

1.34

1.07

-0.09

-0.46

-0.71

-1.31

Education & Health

2.88

2.57

1.72

1.77

2.00

2.06

1.56

1.08

1.56

2.42

2.07

Professional & Business Services

1.64

-3.60

-5.16

2.92

3.54

3.29

3.55

3.41

3.70

2.89

1.62

-0.04

-3.14

-6.04

-2.27

-0.38

-0.05

0.50

-0.33

1.00

2.09

1.67

Leisure & Hospitality

2.15

-1.66

-2.44

1.27

2.77

2.69

3.21

1.42

0.88

1.07

1.26

Government

1.16

0.98

-0.19

-0.93

-1.40

-0.41

-0.13

0.72

0.46

0.47

0.68

Federal

0.54

1.11

2.41

4.82

-0.84

-1.45

-3.47

3.61

-1.14

-1.79

-1.12

State & Local

1.25

0.97

-0.54

-1.31

-1.48

-0.25

0.36

0.33

0.69

0.80

0.93

Information

Institute for Economic Competitiveness

23

U . S . F orecast T ables Table 6. Quarterly Employment

Table 6. Quarterly Employment

2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2

Employment (Millions) Total Nonfarm Employment

136.2 136.7 137.2 137.7 138.2 138.7 139.3 139.8 140.4 141.0 141.5 142.1 142.6 143.2 143.6 144.1

Private Nonfarm

114.3 114.8 115.3 115.8 116.2 116.7 117.3 117.8 118.3 118.8 119.4 119.9 120.5 121.0 121.4 121.8

Mining

0.8

0.8

0.8

0.8

0.8

0.8

0.8

0.8

0.8

0.8

0.9

0.9

0.9

0.9

0.9

0.9

Construction

5.8

5.9

5.9

6.0

6.1

6.2

6.3

6.5

6.6

6.8

6.9

7.1

7.2

7.3

7.4

7.5

Manufacturing

12.0

12.0

12.1

12.2

12.3

12.3

12.3

12.3

12.4

12.4

12.4

12.4

12.4

12.4

12.4

12.4

Trade, Transportation and Utilities

26.0

26.2

26.2

26.2

26.3

26.4

26.4

26.5

26.5

26.6

26.7

26.8

26.8

26.9

27.0

27.1

Transportation & Warehousing

4.5

4.5

4.5

4.5

4.6

4.6

4.6

4.7

4.7

4.8

4.8

4.8

4.9

4.9

5.0

5.0

Financial Activities

7.9

7.9

7.9

7.9

7.9

7.9

7.9

7.9

7.9

7.9

7.9

7.8

7.8

7.8

7.8

7.8

Education & Health

20.7

20.8

20.9

20.9

21.0

21.0

21.1

21.2

21.2

21.3

21.5

21.6

21.7

21.9

21.9

22.1

Professional & Business Services

18.6

18.8

18.9

19.1

19.2

19.4

19.6

19.8

20.0

20.1

20.2

20.4

20.5

20.7

20.8

20.8

2.7

2.7

2.7

2.7

2.7

2.7

2.7

2.7

2.7

2.7

2.7

2.7

2.7

2.8

2.8

2.8

Leisure & Hospitality

14.2

14.3

14.4

14.4

14.4

14.5

14.6

14.6

14.6

14.6

14.7

14.7

14.7

14.8

14.9

14.9

Government

21.9

21.9

21.9

22.0

22.0

22.0

22.0

22.1

22.1

22.1

22.1

22.2

22.2

22.2

22.2

22.3

2.7

2.7

2.8

2.8

2.8

2.8

2.8

2.8

2.8

2.8

2.7

2.7

2.7

2.7

2.7

2.7

19.1

19.1

19.1

19.2

19.2

19.2

19.2

19.3

19.3

19.3

19.4

19.4

19.5

19.5

19.5

19.6

Information

Federal State & Local

Growth Rates Total Nonfarm Employment

1.40

1.58

1.48

1.52

1.44

1.50

1.63

1.49

1.53

1.69

1.49

1.66

1.63

1.61

1.18

1.15

Private Nonfarm

1.69

1.88

1.52

1.69

1.65

1.67

1.83

1.71

1.73

1.91

1.72

1.87

1.85

1.79

1.29

1.25

Mining

4.82

5.49

4.62

-0.69

-1.86

-1.02

-0.17

1.49

1.01

2.33

3.81

3.43

2.96

1.64

1.05

0.54

Construction

1.10

2.94

3.37

5.04

7.32

7.58

7.95

9.11 10.06

9.28

8.74

8.38

7.66

6.63

5.56

4.56

Manufacturing

-0.40

1.37

1.96

3.95

3.38

0.08

1.28

0.64

1.14

1.35

0.66

-0.12

0.13

-0.01

0.10

-0.10

Trade, Transportation and Utilities

2.29

1.99

0.54

0.61

0.77

1.05

0.73

0.86

0.95

1.28

1.08

1.24

1.25

1.14

0.93

1.03

Transportation & Warehousing

0.37

2.21

1.27

2.69

2.46

2.95

3.46

3.22

3.27

3.81

3.62

3.56

3.57

3.43

3.36

2.97

Financial Activities

1.16

0.14

-0.03

-1.64

0.80

0.52

-0.47

-0.72

-0.35

-0.30

-0.50

-0.68

-0.94

-0.72

-1.00

-1.65

Education & Health

1.52

1.20

1.34

1.33

0.67

0.97

1.62

1.40

1.19

2.01

2.72

2.91

1.80

2.24

1.44

2.48

Professional & Business Services

3.06

2.73

3.22

3.87

2.86

3.67

4.90

3.89

3.07

2.93

2.18

2.81

3.58

2.99

1.62

1.21

-0.64

0.49

2.52

-2.03

-3.32

1.53

-2.83

1.02

4.72

1.11

0.67

2.14

2.90

2.64

2.71

1.92

2.20

3.02

1.12

1.30

1.42

1.83

1.17

0.88

0.52

0.93

0.39

0.91

1.30

1.68

1.46

1.13

Government

-0.08

0.00

1.23

0.64

0.37

0.64

0.55

0.32

0.46

0.49

0.28

0.51

0.48

0.62

0.57

0.63

Federal

-4.37

-3.80 11.83

3.13

1.92

-2.46

0.48

-1.69

-1.74

-1.62

-2.95

-1.46

-1.37

-1.37

-0.79

-1.26

0.28

0.14

1.11

0.56

0.62

0.79

0.80

0.75

0.80

0.75

0.90

0.76

0.89

Information Leisure & Hospitality

State & Local

24

0.55

U.S. Forecast | December 2013

0.55

-0.21

U . S . F orecast T ables Table 7. Quarterly Implicit Price Deflators (2000=100)

Table 7. Quarterly Implicit Price Deflators (2005=100)

2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2

GDP

106.7 107.0 107.4 108.0 108.4 108.9 109.4 109.8 110.2 110.6 111.2 111.6 112.0 112.4 112.9 113.2

Consumption

107.4 107.6 107.9 108.4 108.8 109.1 109.6 110.0 110.4 110.8 111.3 111.8 112.2 112.6 113.0 113.4

Durables Motor Vehicles Furniture

94.5

94.2

94.0

93.8

93.5

93.2

93.0

92.7

92.5

92.3

92.1

91.8

91.6

91.3

91.0

90.7

111.1 111.6 111.8 111.9 112.0 112.1 112.2 112.3 112.5 112.8 113.0 113.2 113.3 113.5 113.7 113.8 91.4

90.8

90.6

90.4

90.2

90.1

90.0

89.9

89.8

89.7

89.6

89.5

89.4

89.2

89.1

88.9

Other Durables

104.5 104.6 105.1 105.5 105.8 106.1 106.4 106.7 107.0 107.3 107.6 107.9 108.2 108.4 108.7 108.9

Nondurables

112.4 111.9 112.1 112.3 112.5 112.7 113.0 113.3 113.7 114.0 114.5 114.9 115.2 115.6 116.0 116.4

Food

108.0 108.0 108.2 108.3 108.5 108.7 109.0 109.3 109.7 110.1 110.5 110.8 111.1 111.4 111.7 112.0

Clothing & Shoes 106.2 106.5 106.7 107.0 107.0 107.0 107.0 107.0 107.0 107.0 107.0 106.9 106.9 106.8 106.7 106.5 Gasoline & Oil

151.8 146.6 144.7 144.1 143.1 142.5 141.6 141.0 140.9 140.0 141.1 140.6 140.0 140.8 141.0 141.9

Fuel

146.5 145.3 144.9 146.1 146.2 145.9 145.6 145.4 145.5 145.2 146.3 146.3 146.3 147.1 147.5 148.4

Services

108.0 108.4 109.0 109.6 110.2 110.8 111.3 111.9 112.5 113.1 113.7 114.3 114.9 115.4 116.0 116.6

Housing

106.5 107.1 107.7 108.6 109.3 110.0 110.5 111.1 111.6 112.2 112.7 113.2 113.8 114.3 114.8 115.2

Electricity

104.2 105.0 105.8 106.2 106.4 106.4 106.6 107.1 107.7 108.2 108.7 109.5 110.1 110.4 110.6 111.2

Natural Gas Water & Sewer Telephone

90.7

92.1

91.2

92.0

92.4

93.0

93.7

95.1

97.2 100.9 104.7 106.1 104.2 101.3 100.6 100.5

123.6 124.4 125.5 126.6 127.7 128.8 129.9 131.0 132.0 133.1 134.1 135.1 136.1 137.1 138.1 139.1 97.1

97.1

96.9

96.8

96.7

96.4

96.1

95.8

95.6

95.3

95.1

94.9

94.8

94.6

94.4

94.2

Transportation

108.3 108.5 109.1 109.5 109.9 110.2 110.7 111.1 111.5 112.0 112.6 113.0 113.5 113.9 114.4 114.8

Other Services

111.3 111.5 112.0 112.5 113.2 113.8 114.5 115.0 115.7 116.4 117.1 117.8 118.6 119.3 120.1 120.8

Institute for Economic Competitiveness

25

U . S . F orecast T ables Table 8. Percent Change in Implicit Price Deflators

Table 8. Percent Change in Implicit Price Deflators

2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2

GDP

1.9

1.2

1.7

1.9

1.8

1.5

1.9

1.5

1.6

1.5

1.9

1.6

1.4

1.4

1.6

1.4

Consumption

1.9

0.7

1.3

1.7

1.5

1.4

1.5

1.5

1.6

1.6

1.8

1.6

1.4

1.5

1.5

1.5

-2.3

-1.1

-0.9

-1.0

-1.2

-1.2

-1.0

-1.0

-1.0

-0.9

-1.0

-1.1

-1.1

-1.2

-1.2

-1.3

0.3

1.8

0.4

0.5

0.4

0.2

0.4

0.6

0.7

0.9

0.8

0.6

0.6

0.5

0.6

0.5

-5.8

-2.7

-1.0

-0.9

-0.7

-0.5

-0.2

-0.3

-0.5

-0.5

-0.5

-0.5

-0.6

-0.7

-0.7

-0.8

Other Durables

1.8

0.4

1.9

1.6

1.2

1.2

1.3

1.1

1.1

1.2

1.2

1.1

1.0

0.9

0.9

0.8

Nondurables

4.5

-1.6

0.6

0.9

0.6

0.9

1.0

1.1

1.3

1.1

1.9

1.2

1.0

1.5

1.3

1.4

Food

1.2

0.2

0.7

0.4

0.5

0.7

1.2

1.3

1.3

1.4

1.4

1.2

1.1

1.0

1.0

1.0

Clothing & Shoes

4.7

1.0

0.8

1.0

-0.1

0.1

0.1

-0.1

0.0

-0.1

0.0

-0.1

-0.2

-0.4

-0.4

-0.5

22.0

-13.1

-5.1

-1.5

-2.9

-1.7

-2.5

-1.7

-0.3

-2.6

3.2

-1.3

-1.7

2.3

0.6

2.6

Fuel

4.3

-3.2

-0.9

3.4

0.1

-0.7

-0.9

-0.6

0.3

-0.7

2.9

0.1

-0.1

2.3

1.2

2.4

Services

1.8

1.8

2.0

2.4

2.2

2.0

2.1

2.0

2.1

2.2

2.2

2.1

2.0

1.9

2.1

2.0

Housing

2.5

2.4

2.5

3.2

2.8

2.3

2.1

2.0

2.0

2.0

1.9

1.9

1.9

1.8

1.7

1.7

Electricity

0.6

2.9

3.1

1.6

0.7

0.1

0.7

1.7

2.4

1.9

1.9

2.7

2.3

1.0

0.6

2.3

-12.3

6.6

-3.9

3.5

1.5

2.6

3.2

6.1

9.0

16.4

15.7

5.5

-6.7

-10.7

-2.9

-0.4

Water & Sewer

2.6

2.5

3.6

3.7

3.5

3.4

3.4

3.4

3.2

3.2

3.1

3.1

3.0

3.0

3.0

3.0

Telephone

0.1

0.1

-0.8

-0.5

-0.4

-1.3

-1.1

-1.3

-0.8

-1.2

-0.8

-0.8

-0.6

-0.9

-0.9

-0.9

Transportation

3.7

0.9

2.1

1.5

1.4

1.2

1.7

1.4

1.6

1.7

2.0

1.7

1.6

1.6

1.7

1.5

Other Services

0.6

0.8

1.8

1.7

2.5

2.3

2.2

2.1

2.4

2.3

2.4

2.5

2.7

2.6

2.5

2.5

Durables Motor Vehicles Furniture

Gasoline & Oil

Natural Gas

26

U.S. Forecast | December 2013

U . S . F orecast T ables

Table 9. Annual Implicit Price Deflators (2000=100)

Table 9. Annual Implicit Price Deflators (2005=100)

History 2007

2008

2009

2010

Forecast 2011

2012

2013

2014

2015

2016

2017

GDP

97.3

99.2 100.0 101.2 103.2 105.0 106.5

108.2 110.0 111.8 113.4

Consumption

97.1 100.1 100.0 101.7 104.1 106.0 107.2

108.6 110.2 111.9 113.6

Durables

103.8 101.8 100.0

Motor Vehicles

102.0

Furniture

101.1 100.4 100.0

98.6

97.6

96.5

94.8

99.7 100.0 105.7 108.6 110.4 111.1 95.8

94.2

94.0

92.1

93.6

92.6

91.7

90.5

111.9 112.4 113.2 113.9 90.3

89.9

89.4

88.8

Other Durables

95.7

98.9 100.0 100.4 103.6 104.2 104.3

105.6 106.9 108.0 109.0

Nondurables

97.2 102.7 100.0 103.1 109.1 111.8 111.9

112.4 113.5 115.0 116.6

Food

93.2

98.9 100.0 100.3 104.3 106.7 107.8

108.4 109.5 111.0 112.1

Clothing & Shoes

99.9

99.1 100.0

99.3 101.0 104.7 105.9

106.9 107.0 106.9 106.4

Gasoline & Oil

117.1 136.6 100.0 118.2 148.6 153.9 149.2

143.6 140.8 140.6 142.4

Fuel

107.7 146.0 100.0 117.0 148.7 150.6 147.6

145.8 145.4 146.5 148.9

Services

96.0

98.9 100.0 101.7 103.5 105.7 107.7

109.9 112.2 114.6 116.9

Housing

95.7

98.3 100.0 100.1 101.4 103.7 106.1

108.9 111.4 113.5 115.5

Electricity

91.2

97.1 100.0 100.2 102.1 102.0 104.1

106.2 107.4 109.7 111.8

Natural Gas

112.7 128.2 100.1

98.1

95.4

86.1

91.1

92.1

96.7 104.1 101.5

Water & Sewer

89.0

94.2 100.0 106.3 111.8 118.0 123.1

Telephone

97.2

98.7 100.0

Transportation

92.1

97.0 100.0 102.0 104.7 106.8 108.0

109.7 111.3 113.2 115.0

Other Services

93.0

97.3 100.0 103.1 105.7 108.3 111.0

112.9 115.4 118.2 121.2

99.3

97.5

97.7

97.2

127.2 131.5 135.6 139.6 96.7

95.7

94.9

Institute for Economic Competitiveness

94.0

27

U . S . F orecast T ables Table 10. Percent Change in Implicit Price Deflators

Table 10. Percent Change in Implicit Price Deflators History Forecast 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 GDP

2.5

1.9

0.4

1.8

1.8

1.8

1.3

1.8

1.6

1.6

1.4

Consumption

3.3

1.6

1.2

1.3

2.6

1.7

0.9

1.5

1.5

1.6

1.5

-2.0

-2.1

-0.9

-2.1

-0.6

-1.5

-1.6

-1.1

-1.0

-1.1

-1.4

0.1

-4.1

5.6

2.9

3.1

0.9

1.1

0.4

0.6

0.6

0.5

-1.6

0.3

-2.0

-4.4

-0.2

-0.5

-2.8

-0.8

-0.4

-0.6

-0.8

Other Durables

2.2

3.2

1.3

0.6

3.2

-0.5

0.6

1.4

1.2

1.0

0.7

Nondurables

6.3

1.2

2.8

2.2

5.8

1.9

-0.5

0.7

1.1

1.4

1.4

Food

4.9

6.9

-1.8

1.3

5.1

1.2

0.8

0.6

1.3

1.2

1.0

Clothing & Shoes

-1.2

-0.9

1.5

-1.4

4.3

2.5

1.1

0.5

0.0

-0.2

-0.5

Gasoline & Oil

30.9

4.8

26.8

13.4

19.5

4.9

-5.4

-2.8

-1.8

0.6

2.1

Fuel

27.7

22.4

-0.8

15.7

26.2

2.9

-3.9

0.5

-0.5

1.3

2.1

Services

3.3

2.5

1.1

1.5

2.0

2.1

1.8

2.1

2.1

2.1

2.0

Housing

3.1

2.5

0.9

0.3

1.9

2.3

2.3

2.7

2.0

1.9

1.6

Electricity

5.0

8.2

-0.4

0.5

2.5

-0.8

3.1

1.4

1.7

2.0

2.7

Natural Gas

3.4

19.1

-18.3

-1.2

-2.0

-4.8

6.6

0.9

8.7

0.9

2.0

Water & Sewer

5.2

6.8

6.0

5.7

4.9

6.0

3.3

3.6

3.3

3.0

2.9

Telephone

1.3

2.0

0.6

-1.1

-1.5

0.1

-0.5

-0.8

-1.1

-0.8

-1.0

Transportation

3.3 5.9 2.2 1.5 3.1 and 1.3its Components 1.3 1.6 1.6 Table 11. Personal Income

1.7

1.5

2.3 Forecast 2.5

2.5

Durables Motor Vehicles Furniture

Table 11. Personal Income and its Components

Other Services

3.2

2007

4.8

2008

2.4

2009

History 2.7

2010

2.8

2011

2.1

2012

2.3

2013

2.1

2014

2015

2016

2017

Personal Income Billions Current Dollars Personal Income

11995.8 12430.6 12082.1 12435.2 13191.3 13743.8 14132.8

Wages & Salaries

7899.1

8079.2

7787.8

7967.3

Other Labor Income

1041.4

1075.1

1077.5

1120.4

1145.4

941.1

979.5

937.6

986.7

1082.6

Nonfarm Income

8278.5

8611.6

14768.4 15433.4 16176.6 16972.5

8843.0

9203.4

9639.1 10097.2 10544.7

1170.6

1190.0

1225.3

1281.7

1349.4

1422.1

1149.6

1218.6

1278.4

1346.0

1415.8

1466.1

Farm Income

38.1

47.0

35.5

46.0

72.6

75.4

130.4

104.8

100.8

96.4

95.5

Rental Income

189.4

262.1

333.7

402.8

484.4

541.2

594.3

624.0

618.4

606.6

602.4

Dividends

816.6

805.5

547.9

544.6

680.5

746.9

777.3

870.8

901.7

937.4

967.5

Interest Income

1350.1

1361.6

1263.9

1195.0

1204.1

1211.6

1227.9

1278.1

1378.2

1514.2

1737.7

Transfer Payments

1722.8

1884.0

2140.2

2276.9

2306.9

2358.3

2446.0

2573.8

2685.5

2819.7

2933.5

499.7

516.9

506.3

514.7

423.8

436.4

574.2

607.1

647.6

688.9

722.7

Personal Income

5.3

3.6

-2.8

2.9

6.1

4.2

2.8

4.5

4.5

4.8

4.9

Wages & Salaries

5.3

2.3

-3.6

2.3

3.9

4.0

2.7

4.1

4.7

4.8

4.4

Other Labor Income

4.4

3.2

0.2

4.0

2.2

2.2

1.7

3.0

4.6

5.3

5.4

Personal Social Insurance Tax

Percent Change, Annual Rate

Nonfarm Income Farm Income Rental Income

-7.5

4.1

-4.2

5.3

9.7

6.2

6.0

4.9

5.3

5.2

3.6

5.9

24.9

-21.8

30.4

59.2

4.2

73.0

-19.6

-3.6

-4.4

-0.9 -0.8

5.3

52.4

18.4

20.1

21.1

8.2

10.7

1.8

-2.1

-1.3

10.0

-11.0

-32.5

22.8

19.4

24.0

3.2

7.6

3.0

4.2

2.4

9.9

-2.2

-8.9

-2.7

0.6

1.7

1.7

6.4

7.2

12.5

14.8

Transfer Payments

8.1

10.3

14.8

5.5

0.2

3.4

3.4

5.3

4.4

5.1

4.4

Personal Social Insurance Tax

4.9

2.6

-1.8

2.4

-13.3

4.6

44.6

6.0

6.7

6.3

4.7

Dividends Interest Income 28

U.S. Forecast | December 2013

U . S . F orecast T ables Table 12. Personal Consumption Expenditures (Current Dollars)

Table 12. Personal Consumption Expenditures (Current Dollars)

2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2

Consumer Expenditures by Type Billions Current Dollars

Consumer spending on… all goods & services

11525.4 11608.8 11713.3 11836.1 11961.2 12082.8 12203.8 12324.7 12454.4 12580.2 12725.6 12859.4 12994.5 13142.9 13277.1 13422.4

durable goods

1273.9 1288.4 1294.9 1309.0 1323.2 1339.8 1350.8 1364.8 1380.8 1395.6 1409.9 1420.0 1429.4 1442.4 1451.5 1463.2

furniture and appliances

288.6

291.4

293.8

295.3

296.5

298.1

299.3

302.5

303.7

305.3

308.5

311.2

312.5

314.3

315.8

317.2

information processing equipment

100.7

102.9

103.9

105.3

106.6

107.8

108.9

110.4

111.7

112.8

113.9

114.9

116.1

117.5

118.4

119.6

motor vehicles and parts

428.7

434.1

432.7

437.3

442.9

451.6

455.4

459.5

468.0

475.8

481.3

483.4

485.7

489.8

491.3

494.7

other durable goods

140.3

140.4

140.3

141.6

142.8

143.8

144.7

146.0

147.1

147.9

148.7

149.3

150.1

151.1

151.9

152.7

nondurables clothing & shoes fuel oil & coal gasoline & motor oil

2637.1 2648.2 2660.8 2681.4 2701.0 2720.8 2740.5 2759.7 2782.7 2803.4 2833.8 2858.1 2882.7 2911.2 2936.4 2964.4 363.9

366.9

372.6

376.1

379.0

381.4

384.2

387.0

390.3

393.1

396.0

399.2

403.4

406.3

408.6

22.9

22.5

24.9

25.2

25.2

25.2

25.2

25.2

25.2

25.1

25.3

25.3

25.3

25.5

25.5

412.6 25.7

386.7

380.5

369.4

368.7

366.7

365.6

363.8

362.8

363.2

361.6

365.7

365.2

364.2

366.6

367.2

369.7

893.0

898.1

903.5

909.4

914.8

920.3

926.9

933.7

941.0

947.9

954.7

961.3

968.4

975.4

food

886.2

887.3

other nondurable goods

977.5

991.0 1000.9 1013.3 1026.7 1039.2 1052.5 1064.5 1077.1 1089.7 1105.9 1120.5 1135.2 1151.4 1166.7 1181.0 Consumer Expenditures by Type Billions 2005 Dollars

Consumer spending on… all goods & services

10732.3 10791.4 10852.4 10921.3 10996.3 11070.4 11138.9 11208.5 11281.7 11351.2 11431.4 11507.0 11586.2 11675.7 11750.2 11835.2

durable goods

1348.5 1367.6 1377.5 1396.1 1415.4 1437.3 1452.8 1471.7 1492.6 1512.3 1531.4 1546.6 1561.3 1580.4 1595.4 1613.6

furniture and appliances

315.7

321.0

324.4

326.8

328.8

331.0

332.5

336.3

338.1

340.3

344.2

347.8

349.7

352.3

354.6

356.9

information processing equipment

139.7

144.3

148.2

153.1

158.2

163.3

168.2

173.8

179.1

184.4

189.7

195.1

201.1

207.3

213.1

219.4

motor vehicles and parts

385.8

388.9

387.2

390.8

395.4

403.0

406.0

409.1

415.9

421.9

426.0

427.2

428.5

431.6

432.3

434.7

other durable goods

132.4

132.5

131.9

132.8

133.6

134.3

134.8

135.8

136.5

137.1

137.5

137.9

138.4

139.2

139.8

140.5

nondurables clothing & shoes fuel oil & coal gasoline & motor oil

2347.1 2366.4 2374.2 2387.4 2401.5 2413.9 2425.0 2435.3 2447.4 2459.1 2474.2 2488.2 2503.2 2518.6 2532.0 2546.9 342.5

344.5

349.0

351.5

354.2

356.4

359.0

361.7

364.8

367.6

370.2

373.4

377.5

380.6

383.1

15.6

15.5

17.2

17.2

17.3

17.3

17.3

17.3

17.3

17.3

17.3

17.3

17.3

17.3

17.3

387.3 17.3

254.7

259.6

255.3

255.9

256.3

256.6

256.9

257.4

257.8

258.4

259.3

259.8

260.1

260.4

260.4

260.5

859.0

862.8

866.8

871.0

food

820.8

821.4

825.2

829.2

833.0

836.9

839.3

841.7

845.0

848.2

851.7

855.3

other nondurable goods

924.8

936.0

939.2

945.8

953.3

959.7

965.9

970.9

976.5

982.0

990.4

997.5 1004.8 1013.5 1020.8 1027.8

Real Consumer Expenditures Annual Growth Rate Consumer spending on… all goods & services

1.5

2.2

2.3

2.5

2.7

2.7

2.5

2.5

2.6

2.5

2.8

2.6

2.8

3.1

2.5

2.9

durable goods

7.6

5.7

2.9

5.4

5.5

6.2

4.3

5.2

5.7

5.3

5.1

4.0

3.8

4.9

3.8

4.6

furniture and appliances

11.5

6.7

4.3

3.0

2.4

2.7

1.9

4.5

2.1

2.6

4.7

4.1

2.2

2.9

2.7

2.6

information processing equipment

14.1

13.1

11.1

13.1

13.2

12.9

12.2

13.1

12.4

11.9

11.3

11.5

12.1

12.4

11.2

11.7 2.2

motor vehicles and parts other durable goods nondurables clothing & shoes

6.4

3.2

-1.7

3.7

4.7

7.6

3.1

3.0

6.7

5.8

3.8

1.2

1.3

2.9

0.6

-3.1

0.5

-1.9

2.8

2.4

2.0

1.7

2.7

2.2

1.7

1.2

1.1

1.6

2.3

1.6

2.0

2.6

3.3

1.3

2.2

2.4

2.1

1.8

1.7

2.0

1.9

2.5

2.3

2.4

2.5

2.1

2.4

-3.4

2.3

5.3

2.8

3.1

2.5

2.8

3.1

3.4

3.0

2.9

3.4

4.4

3.3

2.6

4.4

-24.9

-3.4

44.6

1.0

0.4

0.5

0.9

-0.4

0.0

0.0

-0.1

-0.2

0.1

0.1

0.1

-0.4

gasoline & motor oil

0.4

7.7

-6.5

0.8

0.7

0.5

0.5

0.6

0.8

0.8

1.4

0.8

0.6

0.4

0.0

0.1

food

2.7

0.3

1.9

1.9

1.9

1.9

1.1

1.2

1.6

1.5

1.7

1.7

1.8

1.8

1.9

1.9

other nondurable goods

6.7

4.9

1.4

2.9

3.2

2.7

2.6

2.1

2.4

2.3

3.5

2.9

2.9

3.5

2.9

2.8

fuel oil & coal

Institute for Economic Competitiveness

29

U . S . F orecast T ables Table 13. Personal Consumption Expenditures (2000 Dollars)

Table 13. Personal Consumption Expenditures (2005 Dollars) History 2007

2008

2009

2010

Forecast 2011

2012

2013

2014

2015

2016

2017

Consumer Expenditures by Type Billions Current Dollars Consumer spending on… all goods & services

9744.4 10005.5

9842.9 10201.9 10711.8 11149.6 11485.1

durable goods

1184.6

1102.3

1023.3

1070.7

1129.9

1202.7

1266.2

1316.7

1373.0

1425.4

1469.6

283.5

268.7

244.3

250.4

260.1

275.1

286.3

295.9

302.7

311.6

317.8

furniture and appliances information processing equipment motor vehicles and parts other durable goods nondurables clothing & shoes fuel oil & coal gasoline & motor oil

11898.3 12390.8 12930.6 13499.0

84.8

83.4

81.2

90.3

92.0

96.1

100.3

105.9

110.9

115.6

120.1

400.6

339.6

317.1

342.0

368.7

401.7

426.4

441.1

464.7

485.1

496.7

113.2

112.1

105.5

110.0

121.2

129.3

139.7

142.1

146.4

149.8

153.2

2176.9

2273.4

2175.1

2292.1

2472.8

2567.0

2620.8

2691.0

2771.6

2871.5

2978.7

323.7

319.5

306.5

320.6

338.3

354.6

363.4

377.3

388.6

401.2

414.6

25.6

30.8

24.3

26.2

29.4

26.7

24.3

25.2

25.2

25.3

25.7

319.9

358.3

260.2

307.3

379.5

390.4

381.3

367.6

362.9

365.4

370.8

food

737.3

772.9

770.0

788.9

833.0

863.3

882.5

901.0

923.9

951.2

978.7

other nondurable goods

770.4

791.9

814.2

849.2

892.6

932.1

969.3

1020.0

1071.0

1128.2

1188.8

Consumer Expenditures by Type Billions 2005 Dollars Consumer spending on… all goods & services durable goods furniture and appliances information processing equipment motor vehicles and parts other durable goods

10035.5

9999.2

9842.9 10035.9 10291.3 10517.6 10714.9

1141.7

1083.2

1023.3

1085.7

1157.1

1246.7

1335.7

10960.1 11245.1 11550.1 11881.0 1406.6

1482.3

1554.9

1623.8

280.4

267.7

244.3

261.5

276.0

292.8

311.0

327.7

336.8

348.5

358.1

71.9

76.9

81.2

97.2

108.2

122.0

137.6

155.7

176.4

198.3

222.8

392.8

340.8

317.1

323.4

339.4

364.0

383.7

394.1

413.2

428.3

436.2

119.5

113.4

105.5

108.9

114.9

122.2

132.3

133.2

136.0

138.2

140.9

2239.3

2214.7

2175.1

2223.5

2266.0

2296.8

2341.8

2394.2

2441.7

2496.0

2554.9

323.9

322.3

306.5

322.7

334.9

338.9

343.2

352.8

363.3

375.4

389.5

23.8

21.1

24.3

22.4

19.8

17.7

16.4

17.3

17.3

17.3

17.3

gasoline & motor oil

273.2

262.4

260.2

259.9

255.4

253.7

255.6

256.0

257.6

259.9

260.5

food

791.3

781.9

770.0

786.5

798.8

809.4

818.8

831.1

843.5

857.2

873.0

other nondurable goods

825.2

828.3

814.2

833.0

861.6

885.1

918.1

949.5

973.8

1001.6

1032.1

nondurables clothing & shoes fuel oil & coal

Real Consumer Expenditures Annual Growth Rate Consumer spending on… all goods & services

1.5

-1.9

-0.1

3.1

2.0

2.0

2.0

2.6

2.5

2.9

2.9

durable goods

4.1

furniture and appliances

0.9

-12.4

3.0

9.3

5.8

7.9

6.4

5.1

5.2

4.5

4.7

-9.1

-2.0

8.3

6.0

4.7

8.0

3.1

2.8

3.5

2.6

20.4

0.4

12.9

16.8

14.5

12.6

11.9

13.2

13.0

12.4

12.3

0.9

-23.0

7.9

11.0

3.8

7.3

3.5

3.7

4.7

2.3

2.2

other durable goods

3.3

-12.3

0.6

5.5

2.8

11.3

4.0

1.3

2.1

1.5

2.1

nondurables

0.1

-2.6

0.2

3.3

0.7

1.6

2.6

2.0

1.9

2.4

2.4

information processing equipment motor vehicles and parts

clothing & shoes

1.0

-3.2

-1.0

7.6

1.2

1.1

1.7

3.5

3.1

3.5

3.9

fuel oil & coal

-5.3

7.9

7.5

-7.6

-11.0

-4.9

-10.1

13.7

0.1

0.0

-0.2

gasoline & motor oil

-3.3

-3.9

-1.1

2.2

-2.6

-0.9

3.4

-1.1

0.7

0.8

0.0

food

0.2

-3.7

2.1

2.1

0.3

1.9

1.0

1.9

1.3

1.7

1.9

other nondurable goods

1.2

-0.6

-0.6

3.6

2.9

2.9

4.6

2.5

2.3

3.2

3.0

30

U.S. Forecast | December 2013

U . S . F orecast T ables Table 14. Business Fixed Investment

Table 14. Business Fixed Investment History

2007

2008

2009

2010

Forecast 2011

2012

2013

2014

2015

2016

2017

Billions Current Dollars Business Fixed Investment

1920.6 1941.0 1633.4 1658.2 1809.9 1970.0 2040.8

2164.5 2306.7 2496.1 2664.9

Producers Dur. Equipment

885.8

825.1

644.3

731.8

832.7

907.6

934.6

999.6 1069.7 1139.8 1206.2

Nonresidential Structures

496.9

552.4

438.2

362.0

380.6

437.3

458.1

487.7

522.8

603.0

666.7

Non-Farm Buildings

293.9

317.5

249.1

173.7

170.2

190.9

200.8

220.9

263.1

328.7

382.7

Commercial

150.7

148.9

95.4

64.7

66.8

75.6

80.1

89.3

111.5

150.9

186.4

Industrial Other Buildings Utilities Mines & Wells

40.2

52.8

56.3

39.8

38.9

45.8

48.3

50.8

55.9

64.8

71.6

103.0

115.8

97.4

69.2

64.5

69.5

72.4

80.7

95.6

113.0

124.7

89.6

104.6

104.3

93.3

90.8

110.9

107.2

111.2

107.0

107.2

117.1

102.2

117.0

75.0

86.2

110.2

125.5

139.7

144.8

140.9

153.9

152.2

Billions 2005 Dollars Business Fixed Investment

1948.4 1934.5 1633.5 1673.8 1800.4 1931.8 1978.3

2069.0 2182.3 2340.5 2475.2

Producers Dur. Equipment

898.3

836.1

644.3

746.7

841.7

905.9

929.1

991.8 1064.8 1137.0 1205.3

Nonresidential Structures

509.0

540.2

438.2

366.3

374.1

421.6

428.7

436.8

450.7

505.1

542.0

Non-Farm Buildings

305.2

317.9

249.1

179.3

172.4

188.4

193.6

203.8

230.7

275.5

308.4

Commercial

159.9

151.7

95.4

66.6

67.4

74.0

77.0

82.0

97.1

125.6

149.2

43.1

53.8

56.3

40.8

39.1

45.0

46.5

46.9

49.3

54.7

58.0

102.6

112.8

97.4

71.9

65.9

69.3

70.0

74.8

84.1

95.0

100.8

Utilities

94.3

103.6

104.3

89.8

82.8

97.9

93.3

94.9

89.4

87.4

93.2

Mines & Wells

97.9

105.0

75.0

87.8

109.0

124.1

131.5

128.3

121.4

133.0

129.9

Industrial Other Buildings

Annual Growth Rate Business Fixed Investment

8.3

-5.6

-14.2

8.6

10.4

6.5

3.5

5.7

7.6

8.2

6.1

Producers Dur. Equipment

3.1

-15.9

-11.4

20.2

12.9

6.1

2.7

7.7

7.2

6.5

5.1

Nonresidential Structures

21.8

4.7

-32.2

-0.6

15.4

10.7

6.8

2.1

11.5

15.3

9.4

Non-Farm Buildings

22.5

-0.4

-34.0

-21.1

15.2

7.4

6.3

10.5

24.9

23.0

12.9

Commercial

17.3

-11.8

-44.7

-16.8

14.6

11.2

4.9

13.8

33.2

34.0

16.8

Industrial

48.0

22.5

-11.9

-28.8

41.2

7.6

7.3

2.0

14.8

14.7

9.9

Other Buildings

22.6

6.7

-29.7

-19.5

3.6

3.8

8.6

12.8

21.9

14.6

9.2

Utilities

51.4

2.5

-4.1

19.0

7.6

32.0

0.2

-3.0

-3.2

2.5

11.7

1.8

24.4

-42.8

53.6

31.2

1.6

21.4

-6.3

2.1

9.0

0.5

Mines & Wells

Institute for Economic Competitiveness

31

U . S . F orecast T ables Table 15. Government Receipts and Expenditures

Table 15. Government Receipts and Expenditures History 2007

2008

2009

2010

Forecast 2011

2012

2013

2014

2015

2016

2017

Federal Government Receipts and Expenditures Receipts

2660.8

2505.7

2230.1

2391.8

2516.7

2663.0

3063.7

3243.5

3404.9

3556.3

3661.9

Personal Tax and Nontax Receipts

1164.4

1101.7

857.2

893.8

1077.0

1149.2

1279.7

1357.1

1415.7

1464.6

1519.6

362.8

233.6

200.4

298.7

294.3

351.1

355.2

480.2

508.8

527.1

498.2

94.6

94.0

91.4

96.8

108.6

118.0

120.2

135.4

142.7

150.3

161.4

947.3

974.4

950.8

970.9

904.4

937.8

1092.6

1152.4

1223.3

1297.1

1360.7

Expenditures

2927.5

3140.9

3479.9

3721.3

3764.9

3772.7

3812.8

3983.1

4118.0

4297.5

4476.6

Purchases Goods & Services

Corp. Profits Tax Accruals Indirect Business Tax and Nontax Accruals Contributions for Social Insurance

1049.8

1155.6

1217.7

1303.9

1304.1

1295.7

1252.0

1271.2

1278.0

1279.0

1285.9

National Defense

678.7

754.1

788.3

832.8

835.9

817.2

776.6

791.7

794.4

795.6

799.6

Other

371.1

401.5

429.4

471.1

468.2

478.6

475.4

479.5

483.5

483.4

486.3

Transfer Payments

1673.5

1823.5

2135.6

2282.5

2274.3

2283.6

2357.6

2479.5

2585.7

2719.8

2824.1

To Persons

1258.9

1391.9

1608.9

1710.1

1728.2

1772.5

1839.0

1915.1

1984.7

2075.4

2155.5

42.3

45.1

52.7

50.6

56.5

49.9

51.3

56.9

59.0

59.7

60.8

Grants in Aid to State & Local Gov't

To Foreigners

359.0

371.0

458.1

505.3

472.5

443.2

448.8

488.5

522.7

565.0

587.7

Net Interest

386.1

368.4

330.8

351.0

394.1

398.3

397.7

435.3

457.4

497.8

560.6

48.7

56.2

57.4

66.7

Subsidies less Surplus of Gov't Entities

45.4

70.3

81.1

74.1

69.5

65.8

64.2

Surplus (+) or Deficit (-)

-266.7

-635.1 -1249.8 -1329.5 -1248.3 -1109.7

-749.0

-739.6

-713.1

-741.2

-814.7

Receipts

1900.6

1909.1

1919.2

1998.5

2029.9

2039.5

2106.8

2196.0

2297.2

2412.2

2510.5

Personal Tax/Nontax Receipts

1321.3

1328.9

1268.1

1305.7

1366.3

1405.2

1460.9

1497.7

1550.4

1608.3

1668.6

323.5

333.5

287.8

297.6

327.0

348.8

379.8

379.7

390.4

401.5

416.2

State and Local Government Receipts and Expenditures

Corporate Profits Indirect Business Tax and Nontax Accruals

57.9

47.4

45.6

47.7

50.8

51.4

55.9

63.1

64.0

63.9

63.5

Contributions for Social Insurance

18.9

18.7

18.6

18.2

18.3

17.5

17.4

18.0

18.9

19.8

20.6

359.0

371.0

458.1

505.3

472.5

443.2

448.8

488.5

522.7

565.0

587.7

Federal Grants-In-Aid Expenditures

1973.33 2074.15 2191.15 2235.85 2242.98 2292.10 2321.66

2400.36 2480.94 2570.61 2659.67

1752.2

1847.6

1871.4

1870.2

1854.7

1871.3

1879.1

1917.9

1970.1

2029.7

460.9

477.8

566.1

612.0

581.8

552.5

562.4

611.2

655.6

708.5

742.1

Interest Received

17.3

36.0

114.3

123.0

126.7

146.8

143.9

141.6

141.0

142.2

142.9

Net Subsidies

25.6

25.0

22.8

21.4

17.0

14.7

15.7

15.2

14.4

13.6

12.8

2.2

2.6

2.2

2.3

2.3

2.4

2.3

2.4

2.4

2.5

2.5

-72.7

-165.1

-271.9

-237.3

-213.1

-252.7

-214.8

-204.4

-183.8

-158.4

-149.1

Purchases Goods & Services Transfer Payments

Dividends Received Surplus (+) or Deficit (-)

32

U.S. Forecast | December 2013

2098.1

U . S . F orecast T ables Table 16. U.S. Exports and Imports of Goods and Services

Table 16. U.S. Exports and Imports of Goods and Services History 2007

2008

2009

2010

Forecast 2011

2012

2013

2014

2015

2016

2017

Billions of Dollars Net Exports Goods & Services

-709.8

-713.2

-392.2

-518.5

-568.8

-547.2

-508.9

-508.8

-536.9

-552.9

-557.2

Current Account

-713.4

-681.3

-381.6

-449.5

-457.7

-440.4

-400.3

-396.2

-440.2

-483.5

-529.1

Exports -Goods & Services

1665.7

1843.2

1583.8

1843.5

2101.2

2195.9

2252.3

2360.1

2491.1

2646.8

2805.6

Merchandise Balance

-822.7

-834.0

-510.6

-650.2

-744.1

-741.5

-702.6

-702.1

-736.7

-769.9

-793.0

84.28

108.33

93.93

107.70

126.20

132.83

127.49

128.54

132.04

137.39

142.71

Food, Feed & Beverage Industrial Supplies Excl Petroleum

316.3

386.9

293.5

388.6

484.7

482.3

490.1

513.9

541.5

575.8

610.6

Motor Vehicles & Parts

121.3

121.5

81.7

112.0

132.9

146.2

151.4

157.1

168.4

183.9

198.5

Capital Goods, Excl. MVP

433.0

457.7

391.5

447.9

493.3

527.7

536.5

564.9

594.9

627.9

661.2

45.6

43.9

37.7

43.8

48.4

49.3

48.4

48.3

51.3

57.3

63.4

Other

314.5

339.8

279.0

332.1

364.7

384.0

379.9

398.3

421.1

444.8

469.3

Consumer Goods, Excl. MVP

146.0

161.3

149.4

165.3

174.9

181.8

190.2

203.4

214.4

222.0

231.0

64.5

62.0

54.6

57.1

61.7

65.3

65.0

67.7

70.7

73.5

76.7

500.4

545.5

519.1

565.1

627.5

659.9

691.7

724.5

769.0

826.3

884.9

Computer Equipment

Other Consumer Services

Billions of Dollars Imports -Goods & Services

2375.6

2556.4

1976.0

2362.0

2669.9

2743.1

2761.2

2868.9

3028.0

3199.7

3362.8

Merchandise

2000.3

2146.4

1587.3

1951.2

2234.6

2295.4

2299.5

2375.9

2497.3

2629.2

2752.6

83.0

90.4

82.9

92.5

108.3

111.1

115.6

115.8

120.7

125.5

129.7

Food, Feed & Beverage Petroleum & Products

346.7

476.1

267.7

353.7

462.2

433.9

393.0

376.4

362.6

356.0

348.6

Industrial Supplies Excl Petroleum

297.9

318.7

196.6

249.4

293.0

290.0

290.8

284.5

308.8

329.0

338.2

Motor Vehicles & Parts

258.5

233.2

159.2

225.7

255.3

298.6

309.4

321.3

325.5

339.1

355.2

Capital Goods, Excl. MVP

449.1

458.7

374.1

450.4

513.5

551.7

553.4

593.5

641.8

693.3

741.7

Computer Equipment

105.5

101.2

94.2

117.3

119.7

122.2

118.5

119.9

125.0

130.6

135.6

Other

309.2

322.0

249.2

301.9

358.2

389.3

390.5

425.8

465.2

509.2

551.3

Consumer Goods, Excl. MVP

480.0

486.7

431.4

486.5

517.5

519.7

536.4

574.9

615.9

653.7

698.3

Other Consumer Services

85.1

82.5

75.5

93.1

85.1

90.6

100.9

109.5

122.0

132.5

141.0

375.3

410.0

388.7

410.8

435.3

447.7

461.7

493.0

530.7

570.5

610.2

-703.6

-546.9

-392.2

-462.6

-445.9

-443.1

-485.6

-496.9

-484.5

Billions 2005 Dollars Net Exports Goods & Services

-430.8

-421.4

Exports G & S

1647.3

1741.8

1583.8

1765.6

1890.6

1957.5

2004.2

2087.9

2180.7

2294.8

2416.9

Imports G & S

2350.9

2288.7

1976.0

2228.1

2336.4

2388.2

2425.7

2531.0

2666.2

2791.7

2901.4

Exports G & S

14.5

0.0

3.5

15.2

9.2

3.7

3.3

5.1

5.9

6.3

5.7

Exports & Imports % Change Imports G & S

9.0

-1.6

0.9

15.0

10.9

0.0

2.5

4.4

6.2

5.3

5.0

Real Exports G & S

9.9

-2.0

2.5

9.8

4.6

2.4

3.6

4.0

4.8

5.5

5.0

Real Imports G & S

0.8

-5.6

-3.6

11.9

3.6

0.1

3.6

4.7

5.5

4.4

3.7

Institute for Economic Competitiveness

33

In Appeciation

The UCF College of Business Administration would like to thank Alan C. Charron, ‘84, for his generous gift to the Institute for Economic Competitiveness. His support enables the Institute to publish this forecast and will help fund future activities and research. Charron graduated in 1984 with a degree in finance.

He is president of Real Property Specialists, Inc., located in Orlando, Florida.

Founded in 1992, Real Property Specialists, Inc., is a fullservice brokerage company that has built a reputation of providing highly personalized service while being responsive and flexible to its clients' individual needs. They offer a range of commercial real estate services in the Central Florida area including brokerage, appraisal, development, property management and tenant representation.

Real Property Specialists, Inc., has set a new standard of excellence in client service by providing these key advantages over the competition:

Responsiveness. You work directly with a decision

maker who has the flexibility to immediately attend to your needs.

Consistency. We are a unified firm employing team-

members who are committed to the success of our clients.

We pride ourselves on our ability to maintain a dedicated, professional staff that is able to build long-term, comfortable and prosperous relationships with our clients.

Accountability. At Real Property Specialists, our client is the real "Boss." We are accountable to no one other than the client. No company policy interferes with our ability to serve the individual needs of each client.

Experience. The staff at Real Property Specialists is

highly qualified, with most associates having more than a decade of experience in the industry. Our personal portfolio of shopping centers gives us first-hand knowledge of what is important when leasing, managing or selling a property.

Appraisers • Brokers • Consultants 6700 Conroy-Windermere Road, Suite 230 | Orlando, FL 32835 407.291.9000 | www.realpropertyspecialists.com

SEAN M. SNAITH, PH.D.

We would like to recognize the following organizations for their support of the Institute for Economic Competitiveness:

UNIVERSITY OF CENTRAL FLORIDA College of Business Administration Institute for Economic Competitiveness P. O . B o x 1 6 1 4 0 0 , O r l a n d o , F l o r i d a 3 2 8 1 6 P H 4 0 7. 8 2 3 . 1 4 5 3 FA X 4 0 7. 8 2 3 . 1 4 5 4 w w w. i e c . u c f . e d u