The document summarizes an economic forecast presented by Jay Harzell of the University of Texas at Austin to the Federal Reserve Bank of Houston. It outlines forecasts for US economic indicators such as GDP growth, unemployment, inflation and policy uncertainty for 2013-2016. Key points include:
- GDP growth is expected to gradually increase from 2.2% in 2013 to 2.9% in 2016.
- Unemployment will gradually decline from 7.5% in 2013 to 6.1% in 2016.
- Inflation as measured by CPI will be around 2.0-2.3% through 2015.
- Economic growth will continue to be slow due to household deleveraging and government spending
Economic Forecast 2014 - Jay Hartzell, Professor of Finance, McCombs School of Business
1. October 17, 2013
Federal Reserve BankHouston Branch
2014 Economic Forecast
Jay Harzell, Ph.D.
Professor of Finance, McCombs School of Business
The University of Texas as Austin
2.
3. Economic Outlook 2014
Jay C. Hartzell
Chair, Department of Finance, McCombs School of Business
The University of Texas at Austin
4. Economic Forecasts
Research Department, Federal Reserve Bank of
Philadelphia
“Survey of Professional Forecasters”
First quarter (August 16, 2013)
Doing this since 1968
42 “Professional Forecasters”
Provide advice used by large commercial institutions
Members of National Association for Business
Economics (NABE)
Use a variety of techniques and assumptions to arrive
at forecasts
5. Real Gross Domestic Product
Definition
Historic average annual rate of growth
~ 3.0%
Median forecasts (annual rate of growth)
2013
2014
2015
2016
2.2%
2.3%
2.7%
2.9%
Risk of negative quarter (probability)
2013: Q3
2013: Q4
2014: Q1
2014: Q2
2014: Q3
10.5%
11.2%
11.7%
11.5%
11.8%
7. Foundations of Low Growth
Consumer spending and households
Stagnant incomes
High or under employment
Deleveraging
Uncertainty
Business investment
In aggregate, slim profit prospects
Contraction in household and government sectors
Uncertainty, particularly in government policy
Government spending
AAAAGGGGHHH! (debt-to-GDP ratio)
Net Export
Slowing global growth
8. Inflation (Consumer Price Index)
Definition
Historical average (annual rate)
~ 4.0%
Median forecasts (annual rate)
Headline CPI
Core CPI
2013
1.4%
1.8%
2014
2.0%
2.0%
2015
2.3%
2.1%
Long-term forecasts (annual rate)
Headline CPI
2012-2016
2.0%
2012-2021
2.0%
Comments of Fed on controlling inflation
Managing liquidity (e.g., bank and non-bank reserves)
Commitment to inflation
9. View from 30,000 Feet (2013-2016)
Slow growth
Improving private sector balance sheets
Deteriorating (dramatically) public sector balance
sheets
High unemployment
High under-employment
Lower workforce participation
Low interest rates
Low-ish inflation
More wealth re-distribution than creation
Energy
Health care
Education
12. US Economic Policy Uncertainty Index
Econom ic Policy Uncertainty Index
Monthly US Econom ic Policy Uncertainty Index
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9/ 20/ 13 11:09 AM