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Home > Research & Data > Real-Time Data Research Center > Survey of Professional Forecasters > Second Quarter 2002

Second Quarter 2002 Survey of Professional Forecasters

Release Date: May 21, 2002

Forecasters See Improved Prospects for Growth

The outlook for growth in the U.S. economy looks brighter now than it did just three months ago, according to 37 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The forecasters have nearly doubled their estimate of year-over-year growth in real GDP for 2002 compared to their estimate of the previous survey, taken in mid-February. Currently, the forecasters expect real GDP to grow at an annual rate of 2.7 percent in 2002, up sharply from their previous estimate of 1.4 percent. On a quarterly basis, the forecasters see the economy expanding at an annual rate of 2.5 percent in the current quarter, a rate nearly unchanged from the previous estimate of 2.6 percent, and growing at steadily faster rates over the following four quarters, reaching an annual rate of 3.6 percent in the second quarter of 2003. The economy is expected to expand at a rate of 3.4 percent in 2003, down slightly from the previous estimate of 3.5 percent.

The upward revision to growth in 2002 is accompanied by an improved outlook for the unemployment rate. Though the forecasters continue to expect the unemployment rate to peak over the middle of the year, they now see the rate peaking at a slightly lower level. Currently, the forecasters predict the unemployment rate will average 5.9 percent over the middle of the year, down slightly from their previous estimate of 6.0 percent. For the year as a whole, the unemployment rate will average 5.8 percent, down from 6.0 percent in the last survey. The forecasters see unemployment falling in 2003, to an annual average rate of 5.5 percent, the same rate they expected in the last survey.

Inflation, as measured by the fourth-quarter over fourth-quarter rate of change in the consumer price index, will average 2.2 percent in 2002 and 2.5 percent in 2003. Previously, the forecasters expected inflation to average 2.0 percent in 2002. The previous forecast for 2003 aligns with the current forecast of 2.5 percent.

Little Change in the Outlook for Interest Rates

The forecasters see little reason to change their views on the outlook for interest rates. The current outlook is similar to the outlook of three months ago. Currently, the forecasters expect short-term interest rates, as measured by the rate on three-month Treasury bills, to average 2.0 percent in 2002 and 3.4 percent in 2003. The forecast for 2002 is unchanged from the previous forecast, and that for 2003 is down just 0.1 percentage point from the previous forecast. Long-term rates, as measured by the rate on 10-year Treasury bonds, will average 5.3 percent in 2002, up from 5.2 percent in the last survey, and 5.7 percent in 2003, up from 5.5 percent previously.

Stronger Growth Suggests Lower Chance of a Negative Quarter

The forecasters are cutting the chance assigned to a fall in real GDP in the second quarter. Currently, that chance is pegged at just 13 percent, down substantially from 29 percent in the survey of three months ago. Less dramatic downward revisions characterize the next few quarters.

Expectations for Long-Term Inflation Hold Steady

Long-term expectations for inflation are holding steady. The forecasters expect the annual average rate of change in the consumer price index over the next 10 years to be 2.50 percent, the same rate expected in the last survey. The middle range of forecasts is 2.38 percent to 2.75 percent.

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.