State economic and revenue forecast update

The state’s Economic and Revenue Forecast Council has released its quarterly forecast update. Here’s the executive summary:

  • Strong demand combined with ongoing supply issues has caused inflation to remain elevated. The Federal Reserve has raised interest rates to combat inflation.
  • The forecast for GDP growth in 2022 is now 1.8%, up from 1.6% the September forecast. For 2023, real GDP growth is 0.2%, down from 0.6% in the September forecast. We expect growth rates of 1.5%, 2.1%, 2.1%, and 1.9% in 2024
    through 2027 compared to 2.1%, 2.0%, 2.0% and 1.9% in the September forecast.
  • We expect the Federal Reserve to increase the federal funds rate until reaching 4.75% to 5.0% in March 2023.
  • The Washington economy continues to expand but inflation remains high and housing has weakened.
  • Washington housing construction continued to slow in the third quarter of 2022 and again in October.
  • Seattle consumer price inflation of 8.9% outpaced the national average of 7.8% in the year ending in October 2022.
  • The Washington forecast features higher personal income due to data revisions and higher near-term inflation but lower housing construction than in the September forecast.
  • Tracked collections since September have come in well above their forecasted amounts, indicating the expected slowdown in taxable activity was not occurring as early as previously thought. The November forecast still expects a slowdown, but it begins later and starts from a higher level. This has raised forecasted revenue through the 2027 biennium.
  • One exception to the forecast increase was real estate excise tax, which has been decreased due to higher interest rates and lower expected prices. The total forecast for funds subject to the budget outlook process was increased
    by $762 million in the 2021-23 biennium, $681 million in the 2023-25 biennium and $747 million in the 2025-27 biennium.

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