Chicago Fed: Solid Economic Outlook

Econintersect:  The August Chicago Fed Letter is forecasting solid moderate GDP growth for 2012 and 2013.  The key elements in supporting the forecast are improved personal consumption expenditures (50% improvement in the rate of growth over 2011), double digit year-over-year growth in residential investment in each the two years compared to 2011 and solid growth in new cars and light truck sales (reaching 15 million in 2013, up from 12.7 million for 2011).  Other factors in the forecast include oil (West Texas Intermediate) averaging $103-$104 for 2012 and 2013, a slowing of the decline in government consumption (-2.8% in 2011 reaching -0.7% in 2013), slowing of the growth rate for industrial production (4.0% in 2011 down to 2.4% in 2013) and rising interest rates (10-year treasury 2.52% by the end of 2013, compared to the 1.6% area recently).

Here is a summary of the Chicago Fed numbers:

Econintersect reports the following reliability check:  Last year at this time the Chicago Fed forecast GDP growth for 2011 would come in at 2.6%.  This was considerably higher than the 1.6% actual.

John Lounsbury

Source:

• Economy to keep rolling along in 2012 and 2013 (William A. Strauss and Norman Wang, Chicago Fed August Letter, June 2012)