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

Fourth Quarter 2002 Survey of Professional Forecasters

Release Date: November 22, 2002

Forecasters Trim Their Estimates for Growth in 2003

Expectations for growth in real GDP in 2003 are lower than they were three months ago, according to 35 forecasters surveyed by the Federal Reserve Bank of Philadelphia. In addition to cutting their estimates for growth in the current quarter, from 2.6 percent in the last survey to 1.3 percent at present, the forecasters are trimming 0.4 percentage point off their estimates for growth in 2003. At present, that estimate stands at 2.6 percent, down from 3.0 percent in the survey of three months ago. (This marks the second survey in which the forecasters have chopped 0.4 percentage point from their estimate for growth in 2003. In the second-quarter survey, the forecasters thought growth in 2003 would average 3.4 percent.) Despite the downward revision to growth over the next year, the forecasters expect growth to accelerate throughout the year, from an annual rate of 2.6 percent in the first quarter to 4.2 percent in the fourth quarter.

Downward revisions to growth are not leading to a much different outlook for inflation and unemployment. Measured by the year-over-year rate of change in the GDP price index, inflation will average 1.1 percent this year and 1.7 percent in 2003. These estimates are down just 0.1 percentage point from those of the last survey. Likewise, CPI inflation, measured on a fourth-quarter over fourth-quarter basis, will average 2.2 percent this year and in 2003, down 0.1 percentage point from the survey of three months ago.

The forecasters see unemployment averaging 5.8 percent in 2002 and 5.7 percent in 2003. The current estimate for 2002 is down just 0.1 percentage point from the last survey, and the current estimate for 2003 is unchanged from that previous survey.

Downward Revisions to Interest-Rate Projections in 2003

Downward revisions to interest-rate projections for 2003 accompany the outlook for slower growth in real GDP. The forecasters now expect the rate on three-month Treasury bills to average 1.6 percent in 2003. That estimate is down from the previous projection of 2.5 percent. Long-term rates, as measured by the rate on 10-year Treasury bonds, are projected to average 4.4 percent in 2003, down from 5.2 percent in the previous survey, as the table below shows.

Forecasters Raise the Risk of a Negative Quarter

Downward revisions to growth are leading the forecasters to reassess the chance they assign to negative growth over the next four quarters. For the current quarter, the forecasters now peg that chance at 27 percent, up from 19 percent in the last survey. The risk of negative growth in the first quarter of 2003 is 24 percent, marking an increase of 8 percentage points from the previous estimate of 16 percent. Less pronounced upward revisions characterize the outlook for the following two quarters.

Long-Term Expectations for Inflation Fall

Expectations for long-term inflation, measured by the annual average rate of change in the CPI over the next 10 years, have fallen-though not by much. Currrently, the forecasters' expectation stands at 2.45 percent, down just a bit from the long-standing estimate of 2.50 percent in previous surveys. Notably, the downward revision is somewhat more pronounced in the middle range of forecasts, currently 2.03 percent to 2.58 percent. In the survey of three months ago, the middle range of forecasts was 2.40 percent to 2.70 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.