Changes to the Moody’s Analytics outlook for the U.S. economy were minor in December, with many adjustments resulting from newly released and revised historical data.
View Comparison Table: U.S. Macro Forecast M/M Comparison
A tabular comparison of the current and prior vintages including an assessment of whether meaningful changes can be attributed to new or revised data, changed assumptions, or model changes.
National income
U.S. GDP growth edged higher in the third quarter, according to the secondary report from the Bureau of Economic Analysis. Real GDP expanded 2.1%, up from 2% in the second quarter but down from 3.1% in the first quarter of 2019. The BEA revised third quarter GDP growth higher from its first-print estimate of 1.9%. Personal consumption expenditures remained strong, while private domestic investment experienced an upward revision. Third quarter growth in government spending was revised lower.
Several GDP component forecasts changed this month as a result of BEA revisions. A lower path for the 10-year U.S. Treasury yield, the result of newly released history, also caused some changes to the forecast for nonresidential fixed investment. Meanwhile, the forecast path for residential fixed investment shifted because of changes to the outlook for mortgage lending standards and home prices. Overall, Moody’s Analytics expects real GDP to grow by 2.3% this year, similar to last month’s forecast. Growth will clock in at 1.8% in 2020 and 1.9% in 2021.
Fiscal policy
BEA revisions to government expenditures data caused slight changes in our December forecast. We expect government consumption and investment to expand 2.4% this year–a minor downgrade from the November vintage–and 2.7% in 2020, which is on par with the November baseline.
Monetary policy
Our federal funds rate forecast remained the same. We are assuming the Fed will not ease policy in December but will cut interest rates in mid-2020 as growth softens next year.
Labor market
Our unemployment rate over the next several forecast quarters remained largely stable compared with the November baseline. The jobless rate will average 3.7% this year as well next year. The forecast for total employment held steady. Job additions will continue through the middle of 2020.
Energy
The forecast for WTI oil prices experienced little change from the November vintage. Our forecast accounts for weakness in global oil demand, leading to surpluses in the first half of 2020, despite significant declines in exports from Iran. Such market conditions will put downward pressure on near-term prices. Moody’s Analytics expects oils prices to average near $58.61/barrel in 2020 and $61.29/barrel in 2021.
Inflation
The forecast path for CPI and home prices changed as a result of newly published historical data. Moody’s Analytics currently expects 1.8% CPI growth in 2019, followed by a 2.1% increase the following year. Meanwhile, the FHFA All Transactions Home Price Index is expected to rise 4.9% in 2019 and 3.4% in 2020.
CCAR variables
The only stochastic CCAR variable that received a qualitative overlay this month was the 10-year Treasury rate. It was altered to account for recent history and to align more closely with our assumptions for monetary policy. The December baseline shows the 10-year Treasury yield averaging around 2.3% in 2020, compared with 2.4% in the November baseline.
Changes to Historical Data: Global Macro Model Historical Data Changes
A summary of this month’s major changes to historical dataset(s) used in the global model.