The median forecast for real economic growth after inflation is higher for both 2024 and 2025 than previously expected, reports the National Association for Business Economics (NABE).
In the organization’s September survey of its professional forecaster members, the median expectation for real GDP was 2.6%. In its November 2024 survey, expectations were now 2.7%. Fourth quarter growth was also increased, from 1.5% to 2%.
The median projection for 2025 is 2% GDP growth. That’s up from 1.8% in September 20204, a result of modified upward forecast adjustments for the first half of the year.
“In addition, the largest share of respondents—44%—now sees the risks surrounding the outlook as balanced, whereas a majority of respondents in the previous survey thought downside risks were more likely than balanced or upside risks,” said NABE President Emily Kolinski Morris, global chief economist for the Ford Motor Company, in prepared remarks.
Median forecasts on inflation look to further cooling. The consumer price index (CPI) is expected to slow to a 2.3% annual rate by the end of 2025. The personal consumption expenditure (PCE) price index — the metric preferred by the Federal Reserve — is projected to be at an annual rate of 2.1% by the cost of next year.
The Fed has insisted that it won’t rest until it reaches its goal of 2% inflation. If these projections are correct, it would suggest another year of waiting to see the central bank’s ultimate policy on interest rates.
Also, the year-over-year CPI reading for October 2024 was 2.6%; it was 2.4% for September 2024. The combination of factors suggests that the forecasters see mostly stalling inflation, shifting back and forth over a small distance, during the next 12 months.
The panel expects the labor market to soften; however, the median projection was for 180,000 average new jobs a month in 2024 compared to the September expectation of 166,000. The forecast for 2025 would be a monthly rate of 124,000. Unemployment is expected to be 4.3% through 2025, slightly higher than now.
They think that the Fed will make another 25-basis-point rate cut in December 2024 and then another 100 basis points of cuts in 2025, bringing the federal funds rate to 3.375%. At the same time, the median expectation inside the panel was for the yield on the 10-year Treasury to settle at 4.2% at the end of 2024 and to 3.9% by the end of 2025.