Conditions That Will Affect the Outlook for Giving

In late November 2016, the Organization for Economic Cooperation and Development (OECD) projected 3.3% growth in the global economic climate for the year 2017 and 3.6% for the year 2018.70 OECD cited that policy changes to induce fiscal recovery and improve trade will help grow the near-future economy.

The Philanthropy Outlook projects U.S. GDP to be close to 3.0% for both 2017 and 2018,71 in line with OECD’s U.S. projections.72 These projections for GDP, as well as other projections of macro-economic figures developed for this outlook, are likely to hold unless the U.S. experiences a financial shock in 2017 and 2018.73

Specific trends that are expected to impact U.S. GDP and the financial stability of U.S. households in 2017 and 2018 include:

  • In December 2015, the Federal Reserve raised the Federal Funds rate from 0.25% to 0.50%.74 In December 2016, the Federal Reserve raised the Federal Funds rate again, by 0.25%.75 This increase brought the target Federal Funds rate to between 0.50% and 0.75%.76 The Federal Reserve’s outlook for 2017 includes “three quarter point increases.”77
  • Oil prices remained low in 2016 at about half the price per 2014 barrel.78 Between mid-October and mid-November 2016 alone, oil prices dropped 20%.79 Later in November 2016, oil prices began to grow as OPEC member nations signaled potential oil production cuts.80 Such cuts would bring increased costs to consumers, cutting into consumers’ discretionary spending budgets. While increased U.S. production could result in sustained low prices for U.S. consumers,81 forecasters estimate that the average cost for oil will rise gradually into 2017 and 2018.82
  • The U.S. sustained a near 5% unemployment rate through 2016, similar to year-end 2015. The unemployment rate has declined steadily since its most recent peak of 10% in fall 200983 and is forecasted to decline to a low of 4.6% in 2018.84
  • The Consumer Price Index, which measures the change in price for a basket of goods over time, is expected to gradually increase from late 2016 into 2018.85

The Presidential Election

The outcome of the U.S. presidential election on policies that affect nonprofits and philanthropic contributions is an unknown factor as the year 2017 begins. Immediately after the election, U.S. advocacy nonprofits that work in the areas of civil and human rights, the environment, and support of minority groups saw a surge of donations.86 Some of these organizations have seen “unprecedented levels of support.”87 What may be most striking is that many of these organizations received an influx of unsolicited donations generated through grassroots efforts. This raises two questions:

  1. ) Are organizations ready for unexpected donations?
  2. ) Are organizations prepared for both the positive and negative outcomes of the political and economic environments?

While these noted factors may influence the nonprofit sector’s growth, the new president-elect’s policies are likely to be a boon to the general financial sector. The new administration’s plans to cut taxes are expected to expand both public spending and infrastructure.88 These potential policy trends may help to boost philanthropic giving from corporations, foundations, and wealthy donors, in particular.

Below are statements concerning the stability of the variables used in The Philanthropy Outlook model. These variables all significantly influence giving and tend to have the same type of influence year after year. Some factors are more stable than others. More stable factors increase the confidence of these predictions, while less stable factors decrease confidence levels.

For more detailed information about these variables, see the Technical Appendix. For a definition of these variables and their sources, see the “Variable Definitions and Sources” list following the Methodological Overview section in this document or the Technical Appendix.

Stability of the Variables

Consumer Sentiment

Consumer sentiment affects giving by corporations. This variable is generally an unstable economic indicator, meaning the likelihood that the growth rate for this variable will be considerably different than predicted is high.89

Corporate Saving and Corporate Profits

While these variables have significant influence on corporate giving, they are unstable economic indicators. The likelihood that the growth rates for these variables will be considerably different than predicted is high.90

EMPLOYMENT

The employment rate is a stable indicator of giving, meaning the projected growth rate is not likely to differ significantly from what was predicted in this outlook. Therefore, its predicted impact on giving by corporations is deemed highly reliable.91

GROSS DOMESTIC PRODUCT (GDP)

GDP is generally a stable indicator of giving, meaning the projected growth rate is not likely to differ significantly from what was predicted in this outlook. Therefore, its predicted impact on giving by foundations and corporations is deemed highly reliable.92 However, GDP may fall if the U.S. economic environment experiences an exogenous shock as a result of recession, disaster, war, or other severe situations.

Household and Nonprofit Net Worth

Household and nonprofit net worth is a stable indicator of giving, meaning the projected growth rate is not likely to differ significantly from what was predicted in this outlook. Therefore, its predicted impact on giving by individuals/households, foundations, and estates is deemed highly reliable.93

Interest Rate for Governmental Securities

The interest rate for governmental securities has significant influence on estate giving, in particular. This variable is a stable economic indicator. Therefore, its predicted impact on giving by estates is deemed highly reliable.94 This variable plays an overall small role in our predictions, otherwise.

Personal Income

Personal income is a stable indicator of giving, meaning the projected growth rate is not likely to differ significantly from what was predicted in this outlook. Therefore, its predicted impact on giving by individuals/households is deemed highly reliable.95

Personal Consumption

Personal consumption affects giving to education. This variable is generally a stable economic indicator, meaning the projected growth rate is not likely to differ significantly from what was predicted in this outlook.96

Personal Consumption Expenditures

Personal consumption expenditures affect giving to education, health, and public-society benefit. There are many different types of personal consumption expenditures, and the majority are stable economic indicators. This means that for most of these indicators, the projected growth rates are not likely to differ significantly from what were predicted in this outlook.97

Personal Saving Rate

The personal saving rate affects giving to public-society benefit. This variable is generally an unstable economic indicator, meaning the likelihood the growth rate for this variable will be considerably different than predicted is high.98

The S&P 500

While the S&P 500 has significant influence on corporate, individual/household, and foundation giving, this variable is an unstable economic indicator. The likelihood that the growth rate for this variable will be considerably different than predicted is high.99

Conditions That May Impact the Giving Predictions

Within each Philanthropy Outlook component presented in the main sections of this report, we provided an explanation for those economic factors that will likely have the greatest impact on giving. In the following section, we provide explanations for those conditions that may impact the giving predictions.100 We focus on those factors that will have the greatest bearing on giving.
For more detailed information about these variables, see the Technical Appendix.

Predicted Total Giving and Giving by Donor Type will be Lower Under the Following Conditions:

  • S&P 500 grows less than 4.0% in 2016, 4.6% in 2017, and 5.2% in 2018
  • Consumer sentiment declines more than 1.9% in 2016, 2.1% in 2017, and 0.7% in 2018
  • Household and nonprofit net worth grows less than 3.6% in 2016, 3.6% in 2017, and 3.7% in 2018
  • Personal income grows less than 3.4% in 2017 and 3.3% in 2018
  • Corporate saving grows less than 3.2% in 2017 and 4.6% in 2018
  • Corporate profits increase more than 2.7% in 2017 and 3.9% in 2018
  • The number of tax itemizers grows more than 1.6% in 2016, 1.8% in 2017, and 1.9% in 2018
  • GDP grows less than 3.6% in 2016, 3.0% in 2017, and 3.1% in 2018

Predicted Giving to Education will be Lower Under the Following Conditions:

  • S&P 500 grows less than 4.6% in 2017 and 5.2% in 2018
  • GDP grows less than 3.6% in 2016, 3.0% in 2017, and 3.1% in 2018
  • Personal consumption grows more than 3.3% in 2017 and 3.4% in 2018
  • Giving by individuals/households grows less than 3.0% in 2017 and 3.2% in 2018
  • Personal consumption expenditures on healthcare services grows more than 5.3% in 2017 and 5.4% in 2018
  • Personal consumption expenditures on education services grows less than 6.4% in 2016, 6.1% in 2017, and 6.0% in 2018
  • Personal consumption expenditures on nonprofit gross service output grows more than 4.6% in 2017 and 4.7% in 2018
  • Personal consumption expenditures on health grows less than 5.4% in 2017 and 5.5% in 2018
  • Personal consumption expenditures on recreation services grows more than 4.4% in 2016 and 4.2% in 2017
  • Personal consumption expenditures on education grows more than 6.2% in 2016 and 6.0% in 2017
  • Personal consumption expenditures on community school services grows less than 5.7% in 2016 and 5.1% in 2017

Predicted Giving to health will be Lower Under the Following Conditions:

  • GDP grows less than 3.6% in 2016, 3.0% in 2017, and 3.1% in 2018
  • Household and nonprofit net worth grows less than 3.6% in 2016, 3.6% in 2017, and 3.7% in 2018
  • Total giving grows more than 3.6% in 2017 and 3.7% in 2018
  • Personal consumption expenditures on healthcare services grows less than 5.3% in 2017 and 5.4% in 2018
  • Personal consumption expenditures on nursery school to high school grows less than 5.0% in 2017 and 4.9% in 2018
  • Personal consumption expenditures on clothing grows more than 1.4% in 2017 and 1.5% in 2018
  • Personal consumption expenditures on nonprofit sales grows more than 4.7% in 2016, 4.8% in 2017, and 4.9% in 2018
  • Personal consumption expenditures on pharmaceuticals grows more than 6.8% in 2017 and 6.6% in 2018
  • Personal consumption expenditures on education services grows less than 6.4% in 2016 and 6.1% in 2017
  • Personal consumption expenditures on foreign travel grows more than 5.2% in 2016 and 4.5% in 2017

Predicted Giving to Public-Society benefit will be Lower Under the Following Conditions:

  • S&P 500 grows less than 4.6% in 2017 and 5.2% in 2018.
  • Total giving grows less than 3.6% in 2017 and 3.7% in 2018
  • The personal saving rate grows less than 0% in 2016 and 2017
  • Personal saving grows more than 3.1% in 2016 and 3.5% in 2017
  • Personal consumption expenditures on foreign travel grows less than 4.5% in 2017 and 4.6% in 2018