|GDP||1.4% growth for the year; a 2% pace in '17 More »|
|Jobs||Hiring slowing to 150,000/month by end '16 More »|
|Interest rates||10-year T-notes at 1.4% by end '16 More »|
|Inflation||1.8% for '16, up from 2.4% in '17 More »|
|Business spending||Flat in '16, after drop in '15 More »|
|Energy||Crude oil trading from $40 to $45 per barrel in Sept. More »|
|Housing||Prices up 5% on average in major metro areas More »|
|Retail sales||4% growth in '16, compared with 4.8% in '15 (excluding gas) More »|
|Trade deficit||Widening 4% in '16, after a 6.2% increase in '15 More »|
Consumer price inflation will continue to pick up through the rest of the year, though at a rate of 1.8%, a slower pace than we have been forecasting because energy and food price increases are moderating. Moreover, an expected rise in the dollar from further Brexit uncertainties later this year will keep a lid on the prices of imported goods. By December 2017, the inflation rate is likely to rise to 2.4%, mostly because energy prices will stop falling, and the dollar is likely to stabilize.
See Also: All Our Economic Outlooks
Core inflation, which excludes the especially volatile categories of food and energy, will rise about 2.3% in 2016, slightly above the 2.1% pace posted in 2015. Look for price increases for medical care to bump up to 4% in 2016 from 3% in 2015: Premiums for health insurance will rise at a 7% rate as insurance companies reevaluate their costs of participating in the Affordable Care Act, commonly called Obamacare. Prices for shelter will rise 3.5%, up from 3.2%. In 2017, expect core prices to pick up the pace to 3.5%. A steady upward trend in the core inflation rate will likely help spur the Federal Reserve to raise interest rates sometime next year. Monetary policymakers consider the core rate a more reliable indicator of future inflation than the overall index.
Expect food prices to be fairly flat the rest of the year, ending 2016 up just 0.5% higher than 2015, a modest pickup from last year’s 0.8% gain. Prices of meat, eggs and milk are trending down because production has ramped up now that various viruses that threatened livestock have run their course. Moreover, drought conditions have eased, and the relatively strong value of the U.S. dollar versus other key currencies continues to hold down the costs of imported food.
We expect gasoline and other energy prices to stabilize at current levels for the rest of this year. Next year, energy prices should begin to creep upward.
Stiff price competition globally will keep prices of commodities and goods overall fairly flat in coming months. However, prices for services in general will rise above 3% this year. The strong rental housing market will keep rents rising at a robust pace of 3% to 4% -- strongest in the Northeast and in the urban areas of the West. College tuition will rise about 3.5%, higher than inflation, as usual. But price increases for prescription drugs should slow because of competition from cheaper imports, though they’re likely to still rise at a faster rate than overall inflation.