Staff GDP Forecast Summary

Real GDP Growth Forecasts

% Change (AR)

Projected real growth: about 2% (Q4/Q4) in 2016 and

1% in 2017.

Released
Data

-2

Continued drag from net exports.

Sluggish business fixed investment.
Slow productivity growth.

-3
2014

1.81.7

FRBNY Staff

0
May 2015
Vintages

-2

2015
2.0

Real Final Sales

-3
2015

2016

2017

2016
1.9

2.5

2017
1.7

12 Month % Change
6

2.0

2.1

1.5

1.0

Private
Service-Providing
Industries

Goods-Producing
Industries

1.9

12 Month % Change
6

2.0

1.6

-1

Aggregate Weekly Hours Worked

Percentage Points
3.0

1.5

Note: The blue band represents the top 10 and bottom 10 averages of the Blue Chip survey.
Source: FRBNY Staff, BEA, and Blue Chip Economic Indicators

Percentage Points
3.0
(Q4/Q4)
Real GDP

4
3

Negative:

2015
2016
2017

Blue Chip

-1

2.5

Solid income growth and private balance sheets.

Bulk of investment decline in energy sector likely behind us.
Somewhat stimulative fiscal policy.

GDP Growth Contributions: 2015-17

2.0

Near-term forecast below that presented at May 2015 EAP.

Similar to Blue Chip consensus for 2016; below it for 2017.

Outlook reflects countervailing factors.

Positive:

% Change (AR)

0.0

-0.5

-1.0

-1

1.0

0.5

0.30.4 0.3

0.4 0.5
0.2

0.2

0.0

0.0

-0.5

0.5

0.3
0.1

-0.2-0.1
-0.5
-0.8

-1.0
PCE

Res. Inv.

BFI

Inventory
Inv.

Source: FRBNY Staff and Bureau of Economic Analysis

NY Fed / Research & Statistics Group

-0.6

Gov. Exp. Net Exports

-1
2012

2013

2014

2015

2016

Source: Bureau of Labor Statistics

2016 Federal Reserve Bank of New York

Economic Advisory Panel / April 2016

Staff Unemployment Forecast Summary

Unemployment Rate Forecasts

Percent

Modestly above-potential growth leads to decline in

unemployment rate to around 4% by end of 2016,
with stable unemployment rate in 2017.

Below FRBNY forecast at May 2015 EAP.

Less rapid decline than Blue Chip consensus.
5

Factors underlying this forecast.

Percent

Population growth around 1.0%.

Productivity growth gradually rising back to assumed
trend rate of 1% NFBS-basis (1% GDP-basis) in 2017.
Participation rate rises slightly over 2016 and 2017.
Slight uptick in average weekly hours.

May 2015
Vintages
Released
Data

FRBNY Staff

Blue Chip

2014

2015

2016

2017

Note: The blue band represents the top 10 and bottom 10 averages of the Blue Chip survey.
Source: FRBNY Staff, BEA, and Blue Chip Economic Indicators

Productivity Growth: Nonfarm Business Sector

Compensation Growth: Nonfarm Business Sector

20-Qtr MA of 1 Quarter
% Change Annual Rate
4.5

4 Quarter % Change
9

20-Qtr MA of 1 Quarter
% Change Annual Rate
4.5
4

4
3.5
3
Output per
Hour

2.5
2
1.5

0
2000

2002

2004

2006

2008

NY Fed / Research & Statistics Group

2010

2012

2014

6
5

2.5

1.5

Source: Bureau of Labor Statistics

Compensation
per Hour

0.5

0.5

3.5

4 Quarter % Change
9

-1
2000

-1
2002

2004

2006

2008

2010

2012

2014

2016

2016

Note: Shading shows NBER recessions.

Source: Bureau of Labor Statistics

2016 Federal Reserve Bank of New York

Note: Shading shows NBER recessions.

Economic Advisory Panel / April 2016

Overall PCE Inflation Forecasts

Staff Inflation Forecast Summary

% Change (AR)

% Change (AR)

As energy and import prices stabilize, inflation

anticipated to rise gradually toward FOMCs longer-run
goal.

FOMC Objective

Released
Data

PCE inflation projected to reach 2% in 2017.

FRBNY Staff

Underlying assumptions.

Well-anchored longer-run inflation expectations.

Continued downward pressure on goods prices from past
dollar appreciation.
Firming of global demand.
Dissipation of remaining slack by end of 2017.

May 2015
Vintage

-1

-1

-2

-2

-3

-3

2014

2015

2016

2017

Source: FRBNY Staff and Bureau of Economic Analysis

Core PCE Inflation Forecasts

CPI Core Goods and Core Services Inflation

% Change (AR)
2.5

% Change (AR)
2.5

FOMC Objective
FRBNY Staff

2.0

1.5

Core Services

1.5

1.0

0.0
2014

12 Month % Change
5
4

2.0
Released
Data

0.5

12 Month % Change
5

1.0

May 2015
Vintage

0.5

2016

Source: FRBNY Staff and Bureau of Economic Analysis

NY Fed / Research & Statistics Group

-1

-1
Core Goods

-2
0.0

2015

2017

-3
2000

-2
-3
2002

2004

2006

Source: Bureau of Labor Statistics

2016 Federal Reserve Bank of New York

2008

2010

2012

2014

2016

Note: Shading shows NBER recessions.

Economic Advisory Panel / April 2016

Risks to FRBNY Staff Real Activity Outlook

Real GDP Growth Forecast Distribution

% Change Year to Year

Balance of risks slightly skewed to the downside in

2016, with greater downside risk in 2017.

10

Downside:

-2

-2

Financial conditions tighten more than expected.

Slower global growth has larger spillover to U.S. growth.

-4

-4

Major risks
Upside:

Underlying fundamentals for consumer spending and

housing are stronger than expected.
Global growth strengthens and dollar declines, with less
net export drag than expected.

Risks to FRBNY Staff Inflation Outlook

Upside:

Resource slack may be lower than currently estimated.

More modest effect of dollar appreciation on domestic
prices.
Possible reversal of past several years slowdown in health
care price inflation.

Downside:

Stronger global disinflationary pressures emerge.

Inflation expectations becoming unanchored on downside
because of persistent low inflation environment.

NY Fed / Research & Statistics Group

-6
2012

-6
2013

2014

2015

2016

2017

2018

Core PCE Inflation Forecast Distribution

Risks roughly balanced in 2016, and slightly skewed to

the downside in 2017.

% Change Year to Year

10

% Change Year to Year

4

% Change Year to Year

4

-1

-1

-2
2012

2016 Federal Reserve Bank of New York

-2
2013

2014

2015

2016

2017

2018

Economic Advisory Panel / April 2016

Productivity: Low-Growth Regime Probabilities

Percent
100

80

REFERENCE SLIDES

Low Growth = 1.27%

High Growth = 2.96%

80

60

60

40

40

20

20

Source: Authors Calculations

NY Fed / Research & Statistics Group

Percent
100

2016 Federal Reserve Bank of New York

Note: Retrospective assessments

in real time (up to March 2016)

Economic Advisory Panel / April 2016

FRBNY Forecast Details

2015 Q4

2016 Q1

2016 Q2

Summary
Actual
01/20
03/04
04/14
01/20
03/04
Real GDP
1.4
2.1
1.8
0.3
2.1
2.3
Total PCE Deflator
0.3
0.0
-0.2
0.2
1.6
1.1
Core PCE Deflator
1.3
1.3
1.7
2.0
1.3
1.4
Nonfarm Business Sec tor
Output
1.0
2.6
2.2
0.2
2.6
2.8
Hours
3.2
1.6
2.2
1.9
1.3
1.7
Productivity Growth
-2.2
1.0
0.0
-1.8
1.3
1.1
Compensation
1.1
3.0
2.9
2.7
3.2
3.0
Unit Labor Costs
3.3
2.0
2.9
4.4
1.9
1.9
Real GDP Grow th Contributions**
Final Sales to Domestic Purchasers
1.7
3.5
3.1
1.0
3.2
3.5
Private
1.7
3.2
2.8
0.8
2.9
3.2
1.8
2.2
0.8
1.8
2.0
Consumption
1.7
BFI: Equipment
-0.1
0.4
0.2
-0.3
0.4
0.4
BFI: Nonresidential Structures
-0.1
0.1
-0.1
-0.2
0.1
0.1
BFI: Intellectural Property Products
0.0
0.2
0.2
0.2
0.3
0.2
Residential Investment
0.3
0.6
0.3
0.3
0.4
0.5
Government
0.0
0.3
0.3
0.2
0.3
0.3
Federal
0.2
0.1
0.0
-0.1
0.1
0.2
State and Local
-0.1
0.2
0.3
0.3
0.2
0.1
Inventory Investment
-0.2
-0.2
-0.5
-0.1
0.1
-0.1
Net Exports
-0.1
-1.1
-0.8
-0.6
-1.2
-1.1
Exports
-0.3
-0.3
-0.4
-0.3
0.0
0.0
Imports
0.1
-0.8
-0.3
-0.4
-1.2
-1.1
Real GDP Components' Grow th Rates
Final Sales to Domestic Purchasers
1.7
3.4
3.0
1.0
3.1
3.5
Consumption
2.4
2.7
3.2
1.2
2.6
3.0
BFI: Equipment
-2.1
6.0
4.0
-5.5
6.0
6.0
BFI: Nonresidential Structures
-5.1
4.0
-5.0
-7.0
4.0
4.0
BFI: Intellectural Property Products
-0.1
6.0
6.0
5.0
6.0
6.0
Residential Investment
10.1
20.8
8.2
8.7
12.9
14.3
Government: Federal
2.3
2.0
0.0
-1.5
2.0
2.4
Government: State and Local
-1.2
1.4
2.5
2.6
1.4
1.4
Inventory Investment
n/a
n/a
n/a
n/a
n/a
n/a
Net Exports
n/a
n/a
n/a
n/a
n/a
n/a
Exports
-2.0
-2.7
-3.6
-2.1
0.2
0.3
Imports
-0.7
5.4
2.3
2.6
8.2
8.1
Labor Market
Nonfarm Payroll Employment
240
162
352
226
141
177
Unemployment Rate***
4.9
4.9
4.9
4.9
4.8
5.0
Inc ome
Real Disposable Personal Income
2.3
2.2
4.7
2.9
2.4
3.6
Personal Saving Rate***
5.0
5.3
5.4
5.3
5.2
5.5
*End-of-period value
**Grow th contributions may not sum to total due to rounding.
***Quarterly values are the average rate for the quarter. Yearly values are the average rate for Q4 of
Blue and italic text indicate released data; darker colors indicate the most recent forecast.

NY Fed / Research & Statistics Group

2016 Q4/Q4

2015 Q4/Q4

2017 Q4/Q4

04/14
2.5
0.8
1.5

Ac tual
2.0
0.5
1.4

01/20
2.0
1.3
1.4

03/04
2.1
1.0
1.5

04/14
1.9
1.1
1.7

01/20
1.7
1.8
1.7

03/04
1.7
1.9
1.8

04/14
1.7
1.9
1.9

3.1
1.1
2.0
2.8
0.8

2.1
1.6
0.5
2.6
2.1

2.4
1.4
1.0
3.3
2.3

2.6
1.7
0.8
3.2
2.3

2.3
1.6
0.6
3.0
2.3

2.0
1.1
1.0
3.7
2.7

2.1
1.0
1.1
3.3
2.2

2.1
1.3
0.8
3.4
2.6

3.6
3.2
2.2
0.2
0.1
0.2
0.5
0.3
0.2
0.2
-0.6
-0.5
0.1
-0.6

2.5
2.3
1.8
0.2
-0.1
0.1
0.3
0.2
0.1
0.1
0.0
-0.5
-0.1
-0.5

3.2
2.9
1.7
0.3
0.1
0.2
0.4
0.3
0.1
0.2
0.0
-1.1
-0.1
-1.1

3.3
3.0
2.0
0.4
0.1
0.2
0.3
0.3
0.1
0.2
-0.2
-1.1
-0.1
-1.0

2.8
2.5
1.7
0.2
0.0
0.2
0.4
0.3
0.1
0.2
-0.2
-0.8
0.0
-0.8

2.4
2.3
1.5
0.2
0.1
0.2
0.3
0.0
0.0
0.1
0.0
-0.7
0.2
-0.8

2.5
2.4
1.5
0.2
0.1
0.1
0.4
0.0
0.0
0.1
-0.1
-0.7
0.2
-0.9

2.5
2.4
1.6
0.2
0.1
0.1
0.3
0.1
0.0
0.1
-0.1
-0.6
0.2
-0.8

3.5
3.2
4.0
2.0
6.0
16.1
2.4
1.5
n/a
n/a
0.7
3.8

2.5
2.7
2.5
-3.5
3.6
9.4
0.9
1.2
n/a
n/a
-0.6
2.9

3.1
2.5
5.7
4.0
5.7
13.4
2.0
1.4
n/a
n/a
-0.7
7.2

3.3
2.9
6.5
3.1
5.7
10.0
1.8
1.7
n/a
n/a
-0.8
6.6

2.8
2.5
3.0
1.1
5.5
10.5
1.4
1.7
n/a
n/a
-0.1
5.1

2.3
2.2
3.5
3.5
3.5
9.1
-0.5
0.7
n/a
n/a
1.7
5.6

2.4
2.2
4.0
4.0
3.5
9.8
-0.5
0.7
n/a
n/a
1.8
5.9

2.4
2.3
4.0
4.0
3.5
8.8
-0.5
0.8
n/a
n/a
1.6
5.5

197
5.0

231
5.0

152
4.8

207
4.7

205
4.8

129
4.8

116
4.7

142
4.8

4.0
5.5

2.3
5.0

1.8
4.9

2.7
5.6

3.0
5.5

1.4
4.3

1.8
5.5

2.1
5.5

the listed year.

2016 Federal Reserve Bank of New York

Economic Advisory Panel / April 2016