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Short-Term Energy Outlook

Release Date: August 12, 2014  |  Next Release Date: September 9, 2014  |  Full Report    |   Text Only   |   All Tables   |   All Figures

U.S. Economic Assumptions

Recent Economic Indicators

Economic growth slowed in the first quarter of 2014 but improved substantially in the second. The U.S. Bureau of Economic Analysis (BEA) reported that second quarter real gross domestic product (GDP) grew at an annualized rate of 4% from the first quarter. Second-quarter growth was associated with increases in private inventory investment and exports, along with greater state and local government spending and higher nonresidential fixed investment.

Recent employment indicators remained positive; the U.S. Bureau of Labor Statistics (BLS) reported that the four-week moving average of initial unemployment insurance claims for the week ending August 2 was the lowest since February 2006, at 293,500. According to BLS, the U.S. economy added 209,000 jobs in July, and the unemployment rate rose to 6.2%. New orders for durable goods rose 0.7% in June according to the U.S. Census Bureau, compared with the 1.0% decrease reported in May. Orders rose 0.8% excluding transportation, and rose 0.7% excluding defense. Census also reported that sales of new single-family homes fell 8.1% from May to June to a level 11.5% below the June 2013 estimate.

EIA used the July 2014 version of the IHS/Global Insight macroeconomic model with EIA's energy price forecasts as model inputs to develop the economic projections in the STEO. The July 2014 simulation did not include the advanced estimate for second quarter real U.S. GDP growth or its revision for the first quarter of 2014.

Production and Income

Forecast real GDP growth reaches 1.7% in 2014 and accelerates to 2.8% in 2015, below the 2.2% and 2.9% forecast last month. The decrease reflects the downward revision to real GDP growth in the first quarter of 2014, and less optimism about fixed investment in 2015. Consumption in 2015 is forecast to be slightly lower as well because real disposable income grows by 2.8%, down from the 3.1% forecast last month. Real disposable income grows 1.9% in 2014, and total industrial production grows at 4.0% in 2014 and 2.9% in 2015. Growth in industrial production in the manufacturing sector is lower than total industrial production in 2014, at 3.6%, but jumps higher in 2015 to 3.4%.

Expenditures

Private real fixed investment growth averages 4.3% and 8.2% in 2014 and 2015, respectively, led by industrial and transportation equipment in 2014 and by a broad array of equipment categories in 2015. Real consumption expenditures grow faster than real GDP in 2014 at 2.1%, but fall below the real GDP growth rate in 2015 at 2.6%. Durable goods expenditures drive consumption spending in both years. Export growth is 2.5% and 5.5% over the same two years, while import growth is 3.2% in 2014 and 5.1% in 2015. Total government expenditures fall by 0.9% in 2014, but increase by 0.3% in 2015.

Employment, Housing, and Prices

Projected annual growth in nonfarm employment averages 1.8% in 2014 and 2015. This is accompanied by a gradually declining unemployment rate that reaches 5.9% at the end of 2015. The employment growth in 2014 and 2015 is faster than projected last month and the declines in the unemployment rate are about the same. Housing starts grow an average of 10.0% and 26.2% in 2014 and 2015, respectively. Both consumer and producer price indexes continue to increase at a moderate pace, as wages continue to show modest gains.

U.S. Economic Assumptions
  2012 2013 2014 2015
Economic Output, Income, and Expenditures (billion chained 2009 dollars)
Real Gross Domestic Product 15471 15761 16033 16485
percent change from prior year 2.8 1.9 1.7 2.8
Real Disposable Personal Income 11552 11637 11862 12200
percent change from prior year 2.0 0.7 1.9 2.8
Real Personal Consumption Expenditures 10518 10728 10950 11235
Real Fixed Investment 2365 2471 2576 2788
Business Inventory Change 66.08 106.05 89.15 52.22
Employment (millions)
Non-Farm Employment 134.1 136.4 138.8 141.4
Commercial Employment 91.8 93.8 95.8 97.5
Production and Price Indexes
Manufacturing Production Index (2007=100) 95.1 97.9 101.4 104.9
percent change from prior year 4.4 2.9 3.6 3.4
Consumer Price Index (1982-1984=1.00) 2.30 2.33 2.37 2.41
Producer Price Index: All Commodities (1982=1.00) 2.02 2.03 2.06 2.07
Producer Price Index: Petroleum (1982=1.00) 3.07 2.95 2.94 2.93
GDP Implicit Price Deflator (2005=100) 105.0 106.5 108.2 110.1

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