NABE panelists have downgraded their forecasts for growth for this year, with the median forecast for inflation-adjusted GDP at 2.9%
Nearly two-thirds of panelists surveyed by the National Association for Business Economics predict a downside risk to US economic growth in 2022, according to the organization’s most recent survey.
Results from the NABE Outlook Survey, which has compiled economic predictions since 1965, show that experts overwhelmingly view inflation as a key role in risk to the economic outlook—and 77% of those surveyed suggest a wage price spiral is “either already occurring or will be a major risk in 2022.”
“NABE Outlook Survey panelists’ projections for inflation in 2022 are significantly higher than those in the December 2021 survey,” said NABE President David Altig, executive vice president and director of research, Federal Reserve Bank of Atlanta. “They see a risk that inflation will remain higher than previously expected over the next three years, coming largely from the labor market. More than two-thirds of survey respondents cite rising wages as a risk factor.”
NABE panelists have downgraded their forecasts for growth for this year, with the median forecast for inflation-adjusted GDP at 2.9% (down from the 3.6% predicted in the December 2021 survey). The median forecast calls for GDP growth of 2.3%, with supply chain issues and geopolitical tensions emerging as the biggest downside risks to growth estimates.
It’s worth noting that while the way in which the Federal Reserve responds to inflation could create headwinds for the commercial real estate market, “inflation is not the enemy of commercial real estate,” says John Chang, senior vice president and director of research services at Marcus & Millichap. “In fact, inflation can help investors boost their cash flow and property valuations.”
But while the Fed typically targets inflation in the 2% range, it currently sits at between 5 and 7%—and “the Fed doesn’t like inflation that high,” he says. “They’re trying to curb inflation by tightening the money supply.”
On the labor side, the median projection for monthly nonfarm payroll employment growth this year is 317,000, a number that’s 6% lower than December 2021 projections. The panel also says net hiring in 2023 will soften. Importantly, more than three-quarters of the panel say that a wage spiral is occurring or will be a major risk this year.
And “consistent with rising inflation expectations, projections for federal funds target rate hikes have also increased from those in the December survey,” NABE notes The median forecast for end-of-year 2022 is 1.125%, up from a median of 0.375% forecasted in the December survey. The median rate for end-of-year 2023 is 1.875%.