3Q Forecast Survey Summary

SCM’s Quarterly Consensus Survey, conducted at the beginning of the third quarter, saw real GDP forecast consensus slide further to 2.2 percent for 2016 and 2.3 for 2017. The continued below average GDP growth is disappointing but chances of recession are still low due to strong consumer spending and solid labor markets.

Industrial production is expected to rise 0.1 percent in 2016 and 2.0 percent in 2017. Capacity utilization estimates trended slightly lower to 76.2 percent for 2016 and 76.7 percent for 2017, spurring capital spending on Tech products.

Positive housing trends remain in place. Starts are set at 1.2 million units for 2016, and may rise to 1.3 million units in 2017. Unemployment rate forecasts held steady at 4.8 percent in 2016 and should be 4.6 percent in 2017, giving a boost to the recovering housing market and, along with plummeting gas prices, buoying auto sales.

Inflation expectations remain low, held down by soft energy prices and restrained global demand. Below average money supply turnover should keep a lid on prices near term. Continued easy monetary policy is contingent on low inflation. Only one or two interest rate hikes are expected in 2016.

CPI estimates dipped to 1.3 percent for 2016 and 2.2 percent for 2017. Other indices, such as GDP Price Deflator and Personal Consumption Expenditures (PCE), show a similar path, trending toward continued moderate inflation.

The yield curve will elevate but retain a flat shape in 2016, with T-bill rates rising to 0.5 percent and 1.1 percent in 2017. Ten-year Treasury yield expectations are 2.0 percent in 2016 and 2.4 percent in 2017.

SCM Forecast Survey Summary

Series Name15 Ann16 Ann17 Ann
Nominal GDP17953.5018554.7519348.75
Nominal GDP Chg %3.463.664.25
Real GDP16433.6616805.3317222.00
Real GDP Chg %2.442.182.34
Industrial Prod Index107.30106.00108.10
Industrial Prod %1.450.122.00
Capacity Utilization77.9076.1576.70
Housing Starts1.111.191.29
Total Vehicle Sales17.4317.3317.06
Real Disposable Inc12219.0012572.0012861.00
Real Dispos Inc Chg %3.432.932.30
Unemployment Rate5.104.804.56
Corporate Profits1538.701424.101498.00
Corp Profits Chg %-0.702.451.70
Consumer Price Index237.05240.60245.95
CPI Chg %
GDP Price Index109.63111.03113.05
GDP Price Deflator1.021.451.90
Personal Consump Exp109.30111.00113.00
PCE Chg %0.581.201.94
PPI Chg %-0.900.602.20
Crude Oil WTI48.7037.0045.15
Prime Rate3.323.604.20
Fed Funds Target0.200.491.01
Treasury Bill0.060.451.11
LIBOR 3 mo0.310.691.12
2 Yr Treasury Note0.690.711.14
5 Yr Treasury Note1.521.131.43
10 Yr Treasury Bond2.162.042.39
Aaa Corp Yields3.913.954.27
Baa Corp Yields4.995.165.50
Sources: BMO Capital, Congressional Budget Office, Federal Reserve, PNC Economics and Wells Fargo

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