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Home > Research & Data > Real-Time Data Research Center > Survey of Professional Forecasters > Fourth Quarter 1999

Fourth Quarter 1999 Survey of Professional Forecasters

Release Date: November 19, 1999

Forecasters See Stronger Growth in 2000

The U.S. economy will expand at an annual rate of 3.7 percent in 1999's fourth quarter and at an annual rate of 3.1 percent in 2000, according to 43 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The forecasters see growth slipping a bit in the first quarter of 2000, to 2.3 percent, but rebounding from that rate over the following three quarters. Although the survey’s current forecasts for growth in real GDP are stronger than those of the last survey, a direct comparison is somewhat clouded by the BEA’s comprehensive revision, in October, of the national income and product accounts (NIPA), which boosted the measurement of average growth in real GDP over the past 20 years.

Anticipating that the forecasts might be affected by the revision, we asked the forecasters to make a qualitative comparison of their current forecast over the next five quarters with that of three months ago. Thirty-eight forecasters answered the question, and 20 (53 percent) said that, on the basis of economic fundamentals, their current outlook is stronger than that of three months ago; three forecasters indicated that their current forecast is weaker; and 15 (39 percent) said their current forecast is about the same as that of three months ago. On average, these results suggest a slightly stronger outlook for real growth over the near term. Indeed, the current forecasts for the rate of unemployment, a measure of economic health not directly affected by the October revision, are slightly lower than those of the last survey. The forecasters now predict the unemployment rate will average 4.2 percent in 1999 and 4.3 percent in 2000, down from 4.3 percent and 4.4 percent, respectively, in the last survey.

Forecasters Raise Long-Run Growth Estimate in Light of NIPA Revision

In response to a special question about the effect of the NIPA revision on their estimates of long-run growth, 37 forecasters indicated that they are boosting such estimates — but by a small amount. Prior to the revision, the forecasters estimated long-run growth at an annual rate of 2.88 percent. This estimate was revised upward, to 3.10 percent, after the revision, indicating that the forecasters are boosting their estimate of long-run growth by about 0.2 percentage point.

Short-Term Expectations for Inflation Remain Contained

The forecasters expect that inflation, as measured by the Consumer Price Index on a fourth-quarter-over-fourth-quarter basis, will average 2.50 percent in 1999 and 2000. These forecasts are a bit higher than those of the last survey: Previously, the forecasters expected CPI inflation to average 2.30 percent in 1999 and 2.40 percent in 2000. Measured by the GDP price index on a year-over-year basis, inflation is expected to average 1.40 percent in 1999, unchanged from the previous survey’s estimate, and 1.70 percent in 2000, down 0.1 percentage point from the previous survey. Since the October NIPA revision affected the GDP price index, we asked the forecasters to make a qualitative comparison between their current short-term forecast for GDP inflation and their forecast of three months ago. Twenty-two (58 percent) forecasters indicated that the threat of higher near-term inflation is about the same now as it was in the last survey, while roughly equal numbers indicated that the threat is higher (9 forecasters) or lower (7 forecasters). On balance, the October revision seems not to have had a big effect on the forecasters’ prediction for near-term GDP inflation.

Long-Term Expectations for Inflation Are Steady

Long-term expectations for inflation, as measured by the 10-year average rate of change in the CPI, are holding steady at 2.50 percent, the same rate expected in each of the last two surveys. The middle range of forecasts is 2.20 percent to 2.50 percent.

Lower Risk of a Negative Quarter Is Seen

The forecasters are cutting the chances assigned to a negative quarter in each of the next four quarters compared with the chances assigned previously. The forecasters see a 2 percent chance of a negative current quarter, down from 7 percent in the previous survey. Notably, the chance of a negative first quarter in 2000 has fallen from 25 percent in the previous survey to 18 percent in this survey.

The Federal Reserve Bank of Philadelphia thanks the following forecasters for their participation in this survey over the past year:

Maureen Allyn, Scudder Kemper Investments; Robert Barrand David Berson, Fannie Mae; Jason Benderly, Benderly Economics, Inc.; Brian A. Bethune, Caterpillar, Inc.; David M. Blitzer, Ph.D., Standard & Poor’s; Joel Brest and Brian O’Connor, Marketview Publishing Corp.; Robert Chandross, Republic National Bank of New York; Chase Securities, Inc.; William Cheney and Michael Fenollosa, John Hancock Life Insurance Co.; Gary L. Ciminero, Independent Economic Advisory; Michael Cosgrove, The Econoclast; Louis Crandall, Wrightson Associates; William C. Dudley and Edward F. McKelvey, Goldman Sachs; Michael R. Englund, Standard & Poor’s MMS; Brian Fabbri, Paribas; Gerard F. Fuda, Independent Economist; James M. Goldberg, Trust Company of the West; Tracy Herrick, Jefferies & Co., Inc.; Andrew Hodge and Kurt E. Karl, Primark-WEFA; William B. Hummer, Wayne Hummer Investments, LLC.; Saul Hymans, Joan Crary, and Janet Wolfe, RSQE, The University of Michigan; Frederick L. Joutz, Benchmark Forecasts and George Washington University; Dr. Irwin Kellner, Hofstra University & CBS MarketWatch; Allan R. Leslie, Economic Consultant; John Lonski, Moody’s Investors Service; Macroeconomic Advisers, LLC; John J. McAuley, Wilkinson Boyd Capital Markets, Inc.; James P. Meil, Eaton Corporation; Joel L. Naroff, Naroff Economic Advisors; Michael P. Niemira, Bank of Tokyo-Mitsubishi, Ltd.; Elliott Platt, Donaldson, Lufkin & Jenrette; Fred Rafeld, Ashland University; Donald Ratajczak, Georgia State University; Dick Rippe, Prudential Securities; Timothy E. Rogers, Thomson Global Markets; Donna M. Scheck, Honeywell, Inc.; David F. Seiders and Stanley F. Duobinis, National Association of Home Builders; Dr. Constantine Soras, Bell Atlantic; Bruce Steinberg, Merrill Lynch; Lea Tyler, Oxford Economics USA, Inc.; Robert O. Welk, RowTek Economics; Albert M. Wojnilower, Monitor-Clipper Partners; Jay N. Woodworth, Woodworth Holdings, Ltd.; Richard Yamarone, Argus Research Corp.; Mark Zandi, RFA.

This is a partial list of participants. We also thank those who wish to remain anonymous.

The Philadelphia Fed's Survey of Professional Forecasters was formerly conducted by the American Statistical Association (ASA) and the National Bureau of Economic Research (NBER) and was known as the ASA/NBER survey. The survey, which began in 1968, is conducted each quarter. The Federal Reserve Bank of Philadelphia, in cooperation with the NBER, assumed responsibility for the survey in June 1990.

Return to the main page for the Survey of Professional Forecasters.