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Forecast Note: U.S. – Macro [Oct. 2018]
Tuesday, 09 Oct 2018 15:02 ET
By Kara Naccarelli
October 2018 -- Brief notes on changes to the Moody's Analytics U.S. macro forecast outlook pertaining to GDP, government policy, interest rates, oil prices, employment, housing and inflation.

Changes to the Moody’s Analytics outlook for the U.S. economy were small in October. Real GDP grew 4.2% in the second quarter, according to the Bureau of Economic Analysis' third estimate. Growth was unchanged from last month’s second estimate and widespread, including nonresidential fixed investment, consumer spending, and exports. Inventories were a major drag on growth, a plus for the outlook, and housing investment also slipped.

Assumptions surrounding federal government spending were amended this month. The forecast now assumes a longer lag between authorized spending and realized spending. This has resulted in a more gradual and sustained ramp-up in near-term spending. The change has flowed through to topline GDP, noticeably altering the quarterly pattern and shifting some growth from 2018 to 2019. Moody’s Analytics expects real GDP to rise 2.9% in both 2018 and 2019 before moderating in at the end of the decade.

Moody’s Analytics revised its forecast for the federal funds rate to better align with the dates of forthcoming Federal Open Market Committee meetings, and this minor adjustment has flowed through to other interest rates in the model. This change does not reflect a revision in assumptions on the timing, number and magnitude of forthcoming hikes. Moody’s Analytics still expects the Federal Reserve to raise short-term rates again at its December meeting, with rate hikes totaling 100 basis points each in 2018 and 2019.

Our near-term unemployment rate forecast is little changed from September, with the jobless rate averaging about 3.9% this year and 3.4% in 2019. The forecast for total employment was also stable.

The 2019 forecast for West Texas Intermediate oil prices was adjusted higher to account for revised oil production assumptions. Iranian oil exports will decrease substantially in the year ahead. This, along with a downward revision in the outlook for U.S. oil production, creates a supply shortfall by the end of 2019. Prices are higher as a result.

A summary of major changes to historical dataset(s) in October can be found here: https://www.economy.com/support/blog/buffet.aspx?did=F5581963-0698-4BF7-A350-0C29F7A8F843

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. This comparison includes an assessment of whether meaningful changes can be attributed to new or revised data, changed assumptions, or model changes.

The only stochastic Comprehensive Capital Analysis and Review variable to receive a qualitative overlay this month was the 10-year Treasury rate. It was updated to reflect the most recent historical data in order to keep the forecast and history consistent.

Related ReleaseU.S. Forecast - Baseline
SourceMoody's Analytics (ECCA)
GeographyUnited States
Release DateReference date
10 Dec 2019Dec 2019
10 Jan 2020Jan 2020