U.S. Energy Information Administration Independent Statistics & Analysis www.eia.gov

AEO2017 Preliminary Macroeconomic Results

For

Macroeconomic Working Group

July 28, 2016 | Washington, DC

By

Vipin Arora, Elizabeth Sendich, and Russ Tarver

Macroeconomic Analysis Team
Economic growth in major trading partners slows over the projection 

period while the dollar gradually depreciates

Macroeconomic Working Group, 

Washington DC, July 28, 2016 2

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

1989 1994 1999 2004 2009 2014 2019 2024 2029 2034 2039

real trade-weighted GDP of major trading partners

percent

2.0%

1.7%

0.8

0.9

1

1.1

1.2

1.3

1.4

1.5

1989 1994 1999 2004 2009 2014 2019 2024 2029 2034 2039

real trade-weighted exchange rate, USD:major currencies

2009 = 1.0

-0.7%

-0.3%

Preliminary: do NOT cite or distribute
0

5

10

15

20

25

57

58

59

60

61

62

63

64

65

66

67

1989 1994 1999 2004 2009 2014 2019 2024 2029 2034 2039

share of population

.

percent, aged 16-64 . percent, aged 65+

Macroeconomic Working Group, 

Washington DC, July 28, 2016

Demographic factors are an important component of the 

macroeconomic projections

3

share of population

Preliminary: do NOT cite or distribute
Fiscal policy is slightly looser than in the past

Macroeconomic Working Group, 

Washington DC, July 28, 2016 4

-10

-8

-6

-4

-2

0

2

4

0

5

10

15

20

25

30

1989 1994 1999 2004 2009 2014 2019 2024 2029 2034 2039

22%

-3.3%

-4.2%

general government

percent of GDP

deficit .

20%

spending

.

Preliminary: do NOT cite or distribute
Macroeconomic Working Group, 

Washington DC, July 28, 2016 5

0

1

2

3

4

5

6

7

8

9

-1

0

1

2

3

4

5

6

1989 1994 1999 2004 2009 2014 2019 2024 2029 2034 2039

10-year Treasury yield

2.2%

3.7%

CPI inflation

percent

Inflation remains moderate throughout the projection and bond yields 

gradually rise from historic lows

percent

Preliminary: do NOT cite or distribute
Macroeconomic Working Group, 

Washington DC, July 28, 2016

Consumption’s importance in the demand mix fades as non-residential 

investment becomes more important

6

4.9

-2.2

0.2

-1.4

0.0

6.1

4.6

1.9

-3.9

1.9

0.4

-0.4

4.3

4.4

-6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0

Consumption

Government

Nonresidential Investment

Residential Investment

Inventories

Imports

Exports

annual average percent change in period

1989-2014

2015-2040

Preliminary: do NOT cite or distribute
real GDP comparison of historical expansions

Macroeconomic Working Group, 

Washington DC, July 28, 2016

Historical comparisons are skewed because the current U.S. recovery 

remains the slowest of the past ten

7

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41

First Quarter of Trough=1.0

Quarters from Trough

1949Q4-1953Q3

1954Q2-1957Q3

1958Q2-1960Q2

1961Q1-1969Q4

1970Q4-1973Q4

1975Q1-1980Q1

1980Q3-1981Q3

1982Q4-1990Q3

1991Q1-2001Q1

2001Q4-2007Q4

2009Q2-2016Q1

Preliminary: do NOT cite or distribute
Growth in GDP and most of its components is slower in the 

preliminary AEO2017 projection than history

Macroeconomic Working Group, 

Washington DC, July 28, 2016 8

Previous 25 Year Growth

(1989 to 2014)

Projected 25 Year Growth 

(2015 to 2040)

Potential GDP 2.7% 2.1%

Real GDP 2.4% 2.2%

Consumption 2.7% 2.3%

Fixed Nonresidential Investment 4.0% 3.1%

Fixed Residential Investment 0.2% 1.8%

Exports 5.2% 4.2%

Imports 5.3% 3.7%

Preliminary: do NOT cite or distribute
annual average growth in real GDP, 2015 to 2040

Macroeconomic Working Group, 

Washington DC, July 28, 2016

The preliminary AEO2017 GDP projection continues a trend of falling 

expectations

9

2.05

2.10

2.15

2.20

2.25

2.30

2.35

2.40

2.45

2.50

2.55

AEO 2013 AEO 2014 AEO 2015 AEO2016 AEO 2017

Preliminary: do NOT cite or distribute
The preliminary AEO2017 projection for GDP and its components is 

similar to last year

Macroeconomic Working Group, 

Washington DC, July 28, 2016 10

AEO2017

(2015 to 2040)

AEO2016

(2015 to 2040)

Potential GDP 2.1% 2.1%

Real GDP 2.2% 2.2%

Consumption 2.3% 2.3%

Fixed Nonresidential Investment 3.1% 3.2%

Fixed Residential Investment 1.8% 1.6%

Exports 4.2% 4.3%

Imports 3.7% 3.8%

Preliminary: do NOT cite or distribute
annual average growth in real GDP

Macroeconomic Working Group, 

Washington DC, July 28, 2016

Preliminary AEO2017 GDP growth is similar to other forecasts

11

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2015 2020 2025 2030 2035 2040

AEO2017

AEO2016 IHS

CBO

OASDI

Oxford

Projection 2015-40

AEO 2017 2.2%

AEO 2016 2.2%

IHS (May 2016) 2.2%

CBO (July 2016) 2.1%

OASDI (2016) 2.3%

Oxford (May 2016) 2.0%

Preliminary: do NOT cite or distribute
Industrial Output

Macroeconomic Working Group, 

Washington DC, July 28, 2016 Preliminary: do NOT cite or distribute 12
0

10,000

20,000

30,000

40,000

50,000

60,000

2000 2005 2010 2015 2020 2025 2030 2035 2040

70% 75% 76%

14%

11%

12%

billion 2009 dollar

Macroeconomic Working Group, 

Washington DC, July 28, 2016

Non energy-intensive manufacturing grows the fastest of all industries 

over the projection period

Source: U:\output\testruns\testmac\d062016a

13

nonenergy-intensive 

manufacturing

energy-intensive 

manufacturing

nonmanufacturing

services/non-industrial

Preliminary: do NOT cite or distribute
0 1,000 2,000 3,000 4,000

nonmanufacturing

energy-intensive

manufacturing

nonenergy-intensive

manufacturing

MBD other chem. other NEI

construction mining agriculture

bulk

chem. SCG refining

primary food &

metals paper

2016 2040

Macroeconomic Working Group, 

Washington DC, July 28, 2016

Industrial sector composition changes most because of MBD growth

Source: U:\output\testruns\testmac\d062016a

14

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000

MBD other chem. other NEI

construction mining agriculture

bulk

chem. SCG refining

primary food &

metals paper

output (billion 2009 dollar)

Preliminary: do NOT cite or distribute
billion 2009 dollar

Macroeconomic Working Group, 

Washington DC, July 28, 2016

Total shipments heavily dominated by service/non-industrial sector, 

tend to move with GDP although on a downward trend

Source: IHS, K:\output\aeo2016\ref2016\d032416a, U:\output\testruns\testmac\d062016a

15

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

IHS2016

AEO2016

IHS2017

AEO2017

Preliminary: do NOT cite or distribute
0

1

2

3

4

5

6

7

8

2005 2010 2015 2020 2025 2030 2035 2040

AEO2017

IHS2017

AEO2016

IHS2016

WPI crude petroleum

Macroeconomic Working Group, 

Washington DC, July 28, 2016

Oil price not updated for AEO yet, short-term updates have long-term 

effects for IHS (revised down), but current EIA path higher

Source: IHS, K:\output\aeo2016\ref2016\d032416a, U:\output\testruns\testmac\d062016a

Preliminary: do NOT cite or distribute 16
0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2005 2010 2015 2020 2025 2030 2035 2040

AEO2017

IHS2017

AEO2016

IHS2016

WPI natural gas

Macroeconomic Working Group, 

Washington DC, July 28, 2016

Natural gas price not updated for AEO yet, again short-term lower, 

otherwise very little revision from IHS

Source: IHS, K:\output\aeo2016\ref2016\d032416a, U:\output\testruns\testmac\d062016a

Preliminary: do NOT cite or distribute 17
annual average growth rate within the period

Macroeconomic Working Group, 

Washington DC, July 28, 2016

Strong net exports in industrial supplies early, consumer goods peak 

mid-term, capital goods in last decade

Source: U:\output\testruns\testmac\d062016a

18

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

2015-2040 2015-2020 2020-2025 2025-2030 2030-2035 2035-2040

industrial supplies

consumer goods

all goods

capital goods

services

Preliminary: do NOT cite or distribute
billion 2009 dollar

Macroeconomic Working Group, 

Washington DC, July 28, 2016

MBD growth higher because of robust markets domestically and 

revised expectations abroad, starts lower because of historical revisions

Source: IHS, K:\output\aeo2016\ref2016\d032416a, U:\output\testruns\testmac\d062016a

19

2016-2040 CAGRs 

AEO16 2.3% 

AEO17 3.1%

800

1,300

1,800

2,300

2,800

3,300

3,800

4,300

4,800

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

AEO2017

IHS2017

IHS2016 AEO2016

17%

17%

16%

44%

6%

transportation 

equipment

machinery

fabricated metals

computers & 

electronics

appliances & electrical equipment

2016

Preliminary: do NOT cite or distribute
billion 2009 dollar

Macroeconomic Working Group, 

Washington DC, July 28, 2016

Primary metals levels lower because of historical revisions, growth 

higher because of revised expectations/lower exchange rates

Source: IHS, K:\output\aeo2016\ref2016\d032416a, U:\output\testruns\testmac\d062016a

20

2016-2040 CAGRs 

AEO16 1.7% 

AEO17 2.0%

0

50

100

150

200

250

300

350

400

450

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

AEO2017

IHS2017

AEO2016

IHS2016

Preliminary: do NOT cite or distribute
billion 2009 dollar

Macroeconomic Working Group, 

Washington DC, July 28, 2016

Food growth higher because of domestic demand and lower EM 

exchange rates, history and baseline raise levels

Source: IHS, K:\output\aeo2016\ref2016\d032416a, U:\output\testruns\testmac\d062016a

21

2016-2040 CAGRs 

AEO16 1.6% 

AEO17 2.0%

300

400

500

600

700

800

900

1,000

1,100

1,200

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

AEO2017

IHS2017

AEO2016

IHS2016

Preliminary: do NOT cite or distribute
billion 2009 dollar

Macroeconomic Working Group, 

Washington DC, July 28, 2016

Non-metallic minerals* growth higher mostly because of domestic 

demand

Source: IHS, K:\output\aeo2016\ref2016\d032416a, U:\output\testruns\testmac\d062016a; *aka Stone, Clay, & Glass (SCG)

22

2016-2040 CAGRs 

AEO16 2.2% 

AEO17 2.4%

0

50

100

150

200

250

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

AEO2017

IHS2017

AEO2016

IHS2016

Preliminary: do NOT cite or distribute
0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

2005 2010 2015 2020 2025 2030 2035 2040

AEO2017

IHS2017

AEO2016

IHS2016

index, ethane:naphtha price

Macroeconomic Working Group, 

Washington DC, July 28, 2016

Feedstock price ratio decreases help keep bulk chemical growth up, 

EIA lower than IHS

Source: IHS, K:\output\aeo2016\ref2016\d032416a, U:\output\testruns\testmac\d062016a

Preliminary: do NOT cite or distribute 23
billion 2009 dollar

Macroeconomic Working Group, 

Washington DC, July 28, 2016

Bulk chemicals levels higher because of historical revisions, growth 

lower after 2020 because of lower trade expectations

Source: IHS, K:\output\aeo2016\ref2016\d032416a, U:\output\testruns\testmac\d062016a; *IHS baselines revised down

24

2016-2040 CAGRs 

AEO16 2.7% 

AEO17 2.4%

0

100

200

300

400

500

600

700

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

AEO2017

IHS2017

AEO2016

IHS2016

Preliminary: do NOT cite or distribute
billion 2009 dollar

Macroeconomic Working Group, 

Washington DC, July 28, 2016

Paper growth similar, flat because of competitiveness in some subindustries but not others, levels higher because of revisions

Source: IHS, K:\output\aeo2016\ref2016\d032416a, U:\output\testruns\testmac\d062016a

25

2016-2040 CAGRs 

AEO16 0.4% 

AEO17 0.6%

0

50

100

150

200

250

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

AEO2017

IHS2017

AEO2016

IHS2016

Preliminary: do NOT cite or distribute
Summary

• Real GDP growth will average 2.2% per year in 2015-40, similar to 

AEO2016, and in-line with other projections/forecasts.

• Consumption’s importance in the demand mix fades over the projection as 

non-residential investment becomes more important.

• Total industrial sector growth is similar to AEO2016, although the 

composition is slightly different.

• Nonmetallic minerals and bulk chemicals lead early industrial sector growth, 

giving way to rapid growth in metal-based durable goods and their suppliers 

in primary metals.

Macroeconomic Working Group, 

Washington DC, July 28, 2016 Preliminary: do NOT cite or distribute 26
The AEO2017 modeling plan calls for extension to 2050 and other data 

updates and testing

• Extension of macro, industrial output, employment, regional and commercial 

floor space models to 2050.

• Update of regional output, regional industrial output, and regional 

employment data.

• Update of energy-specific equations in the macro model.

• Test the incorporation of price movements from the industrial output model 

into the macro model.

• Test integration between the IHS macro model used in the AEO and the 

Oxford macro model used in the IEO.

Macroeconomic Working Group, 

Washington DC, July 28, 2016 Preliminary: do NOT cite or distribute 27