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Decelerating Growth (15% probability)
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Baseline (75% probability)
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Accelerarting Growth (10% probability)
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Description
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Energy prices continue to rise, inflation takes hold, consumer spending slows, interest rates increase, and housing boom ends.
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Essentially
more of the same, with job growth of 1.5 to 1.7%, moderate inflation, a
gradually slowing housing market, and a sustained expansion.
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Business
spending leads to faster job and personal income growth, and falling
energy/oil prices and lower inflation generate another surge in
consumer spending.
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GDP growth
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Negative to 0%
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3% to 4%
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4.5%+
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Job growth
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Severe job loss (construction, finance, etc.). Job growth is close to zero.
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Business investment continues to expand with annual net job growth of about 2 million.
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Strong economic expansion fueled by high levels of business spending, high productivity, and stronger-than-expected job growth.
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Consumer spending
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Consumer spending contracts succumbing to high oil prices and slower housing market.
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Consumer spending slows slightly due to housing slowdown and higher fuel costs, but stays positive.
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Personal income is strong and inflation remians well-contained. Consumers continue to do what they do best -- spend.
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Business expansion
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Consumer cyclicals and businesses affiliated with the housing market suffer.
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Business expansion generates moderate hiring, providing a strong underpinning to a sustainable recovery.
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Business spending grows rapidly. Research and development spending surges. new capacity needs to be added.
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Inflation
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High energy prices push inflation levels above 4%.
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Steady inflation at approximately 2/5%. Oil production catches up demand and home prices stabilize.
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The economy grows faster, but with enough workers and global capacity, keeps inflation in check over the short term.
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Interest rates
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The Fed reverses course to provide monetary stimulus. 10-year treasury yields move up sharply, before gradually declining.
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Federal funds rate evens out at about 4.5%. 10-year treasuries gradually ervert to historical real levels of approximately 5%.
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Federal funds rate stabilizes at about 4.5%, although inflation and interest rates eventually move up.
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Office
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Negative absorption and higher vacancy. Financial centers struggle the most.
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Office absorption continues its comeback. NOI grows as landlord pricing power returns.
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Office demand is back with a vengeance and supply has a hard time keeping up. Higher rents result.
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Industrial
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Durable goods spending declines sharply, slowing warehouse demand.
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Warehouse continues a steady recovery with lower vacancies and rent traction.
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Strong economic
growth and consumer spending will increase demand for
warehouse/distribution space. Lower vacancies and higher rents will
result.
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Apartment
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If economy
slows, fewer new jobs and less need for apartments will result. Condos
coming back as rental units will weaken apartment rents.
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A good scenario for apartment occupany. Solid job growth means plenty of renters.
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Strong job market fuels demand for apartments.
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Retail
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Retailers suffer as consumer spending slows and unemployment rises.
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Retail sales remain solid, but the slight slowdown in spending leads to more retailer consolidation.
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Consumers keep retail sales strong, and retail sector continues strong.
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Hotel
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Weak economic growth reduces business travel and high energy costs keep consumers home.
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Travel is back, and hotels do well.
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Demand is strong enough that it holds off the eventual surge in new hotel supply.
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