U.S. Economic Assumptions

Recent Economic Indicators

After growing at an annual rate of 3.5% during the third quarter of 2016, real gross domestic product (GDP) growth is projected to increase at an annual rate of 1.8% in the fourth quarter of 2016 and 2.3% in the first quarter of 2017. Inventory investment and net exports, which boosted real GDP growth in the third quarter of 2016, are expected to restrain GDP growth in late 2016 and early 2017. The U.S. economic expansion will become more balanced as 2016 ends, with consumer spending, residential construction, business fixed investment, and government spending all contributing to economic growth.

Production, Income, and Employment

EIA used the December 2016 version of the IHS Markit macroeconomic model with EIA's energy price forecasts as model inputs to develop the economic projections in the STEO.

Forecast real GDP growth is estimated to have been 1.6% in 2016, and it is expected to be 2.3% in 2017 and 2.6% in 2018. Real disposable income grows by 2.8% in 2017 and by 3.9% in 2017. Forecast total industrial production rises by 1.3% in 2017 and by 3.2% in 2017. Projected growth in nonfarm employment averages 1.3% in 2017 and 1.2% in 2017, down from growth of 1.7% in 2016.

Expenditures

Forecast private real fixed investment growth averages 3.9% and 4.1% in 2017 and 2018, respectively. Real consumption expenditures grow faster than real GDP in 2017 and 2018, at 2.8% and 3.0%, respectively. Export growth is 2.3% in 2017 and 2.8% in 2018, and import growth is 4.0 % and 6.0% over the same two years, respectively. Total government expenditures rise by 0.5% in both 2017 and 2018.