Changes to the Moody’s Analytics outlook for the U.S. economy were minimal in June. According to the Bureau of Economic Analysis, first quarter U.S. GDP growth was revised higher to 1.2%, compared with the advance estimate of 0.7%. Meager first quarter growth, however, is largely the result of residual seasonality and other transitory factors, including unseasonably warm weather. Economic activity will rebound strongly in the second quarter behind renewed growth in consumer spending. Moody’s Analytics expects real GDP to rise to 2.2% in 2017 and 2.6% in 2018, both revised higher by less than 0.1 percentage point. 

Oil prices were revised lower in 2017 and 2018, although this has more to do with recent energy market developments than the change to the GDP outlook. This had a modest impact on our near-term inflation outlook. Our federal funds rate forecast remains unchanged from last month. We expect conditions to warrant two additional rate hikes this year with the Federal Reserve beginning more aggressive tightening in 2018.

The unemployment rate forecast was again revised lower to better align the forecast with recent history. Changes in long-term interest rates, inflation, oil prices, and housing activity were little changed from last month’s forecast.

A tabular comparison (available to subscribers) of the current and prior vintages is available under Reference Files » Forecast Documentation » U.S. Macro Forecast M/M Comparison.

The only stochastic CCAR variable that received a qualitative overlay this month was the 10-year Treasury rate. It was updated to reflect the most recent historical data to keep the forecast and history consistent.