Budget & Economic Forecast
February 2014
Global Insight’s February 2014 baseline forecast calls for real GDP growth to accelerate
from 1.9 percent in 2013, to 2.7 percent in 2014 and 3.3 percent in 2015. The November
2013 baseline forecast expected slightly weaker growth of 1.7 percent in 2013, followed
by increases of 2.5 percent in 2014 and 3.1 percent in 2015. Global Insight’s February
baseline forecast for 2014 and 2015 is similar to the Blue Chip Consensus, the median of
50 business and academic forecasts. The Blue Chip forecast is for 2.9 percent growth in
2014, followed by 3.0 percent in 2015. Inflation continues to be of little concern.
February’s baseline anticipates CPI increases of 1.3 percent in 2014 and 1.7 percent in
2015. November’s inflation outlook was similarly subdued.
Global Insight believes the most significant near-term threats facing the U.S. economy
include a longer than expected downshift in monthly employment gains, additional fiscal
policy missteps from Washington, weaker than expected growth in key trading partners,
and interest rates rising sharply in reaction to either additional tapering or renewed fears
of inflation. As in November, GI assigns a 60 percent probability to February’s baseline
and 20 percent probabilities to more pessimistic and optimistic alternative scenarios. In
the pessimistic scenario, the U.S. economy suffers from the combination of unwarranted
fiscal tightening and a deteriorating global economic outlook, including a worsening
Eurozone crisis. The private sector retrenches, housing activity slows, and the recovery
stalls in 2014, barely avoiding recession. In the optimistic scenario, the economy’s solid
fundamentals are enough to withstand recent headwinds and less policy uncertainty early
this year lifts business confidence, bringing about a renewed willingness to hire and
invest. Faster employment and wage growth releases pent-up demand for durable goods.
Consumers open their wallets, the housing recovery heats up, and economic growth
reignites.
Real Gross Domestic Product
Annual Percent Change
0
1
2
3
4
November 2013
February 2014
2.5
1.7
1.9
2.7
3.1
3.3
3.3
3.4
3.1
3.1
2013
2014
2015
Source: U.S. Bureau of Economic Analysis (BEA), Global Insight
The outlook for U.S. economic growth has improved since Minnesota’s Budget and
Economic Forecast was last prepared in November 2013. Global Insight’s February
baseline forecast calls for real GDP growth to accelerate from 1.9 percent in 2013, to 2.7
percent in 2014 and 3.3 percent in 2015.
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2016
2017