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Short-Term Energy Outlook

Release Date: July 8, 2014  |  Next Release Date: August 12, 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, with recent economic indicators showing signs of improvement later in the year. The Bureau of Economic Analysis (BEA) reported that real gross domestic product (GDP) fell at an annualized rate of 2.9% from the fourth quarter of 2013 to the first quarter of 2014. This was a revision from BEA's first and second estimates, which reported an annualized increase of 0.1% and an annualized decrease of 1.0%, respectively. The first revision was associated with a significant decline in inventory investment, while the latest was more broad-based with downward revisions in consumer spending and trade.

Recent employment indicators are more positive; the U.S. Bureau of Labor Statistics (BLS) reported that the four-week moving average of initial seasonally adjusted unemployment insurance claims for the week ending June 28 was 315,000. According to BLS, the U.S. economy added 288,000 jobs in June, and the unemployment rate fell to 6.1%. New orders for durable goods contracted in May, according to the U.S. Census Bureau (Census), as new orders fell 1%, compared with the 0.8% increase reported in April. BEA also reported that real personal consumption expenditures fell 0.1% between April and May, following a 0.2% drop from March to April. Census reported that sales of new single-family homes rose 18.6% from April to May, a level 16.9% above the May 2013 sales estimate.

EIA used the June 2014 version of the IHS/Global Insight (GI) macroeconomic model with EIA's energy price forecasts as model inputs to develop the economic projections in the STEO. This GI forecast does not reflect recent macroeconomic data, such as the second downward revision to first quarter real U.S. GDP growth.

Production and Income

Forecast real GDP grows by 2.2% in 2014 and by 2.9% in 2015, down from the 2.4% and 3.1% increases, respectively, forecast in last month's STEO. Weaker real GDP growth in this month's forecast reflects BEA's first downward revision to first-quarter real GDP growth and a downward revision in 2015 real disposable income growth to 3.1% from 3.6% forecast in last month's STEO. Total industrial production grows by 3.4% in 2014 and 3.0% in 2015. Growth in industrial production in the manufacturing sector is lower than in total industrial production in 2014, at 3.3%, but moves higher in 2015 to 3.4%.


Private real fixed investment growth averages 3.9% and 8.5% 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 2.7%, 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 3.3% and 4.8% over the same two years, while import growth is 2.8% in 2014 and 5.2% in 2015. Total government expenditures fall by 0.9% in 2014, but increase by 0.3% in 2015.

Employment, Housing, and Prices

Projected growth in nonfarm employment averages 1.7% in 2014 and 1.8% in 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 slower than projected last month and the declines in the unemployment rate are about the same. Housing starts grow an average of 14.3% and 28.2% 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 16101 16570
percent change from prior year 2.8 1.9 2.2 2.9
Real Disposable Personal Income 11552 11637 11843 12208
percent change from prior year 2.0 0.7 1.8 3.1
Real Personal Consumption Expenditures 10518 10728 11013 11305
Real Fixed Investment 2365 2471 2567 2785
Business Inventory Change 66.08 106.05 77.63 58.62
Employment (millions)
Non-Farm Employment 134.1 136.4 138.7 141.2
Commercial Employment 91.8 93.8 95.7 97.4
Production and Price Indexes
Manufacturing Production Index (2007=100) 95.1 97.9 101.1 104.6
percent change from prior year 4.4 2.9 3.3 3.4
Consumer Price Index (1982-1984=1.00) 2.30 2.33 2.37 2.42
Producer Price Index: All Commodities (1982=1.00) 2.02 2.03 2.07 2.08
Producer Price Index: Petroleum (1982=1.00) 3.07 2.95 2.99 2.92
GDP Implicit Price Deflator (2005=100) 105.0 106.5 108.3 110.4

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