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Home > Research & Data > Real-Time Data Research Center > Survey of Professional Forecasters > Second Quarter 2003

Second Quarter 2003 Survey of Professional Forecasters

Release Date: May 20, 2003

Forecasters Cut Their Estimates for Growth in 2003

The U.S. economy will likely expand at a slower rate in 2003 than predicted just three months ago, according to 35 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The forecasters now expect year-over-year growth in real GDP to average 2.2 percent in 2003, down from their previous prediction of 2.5 percent. Much of the downward revision for the year comes from a cut in the projection for growth in the second quarter, now expected to average 1.8 percent at an annual rate, down from 2.7 percent in the survey of three months ago. The forecasters continue to expect a rebound over the second-half of the year: Currently, growth is expected to average 3.4 percent at an annual rate in each of the last two quarters of 2003. Previously, the forecasters thought growth would average 3.4 percent in the third quarter and 3.6 percent in the fourth quarter. The forecasters project growth of 3.6 percent in 2004, about the same rate they projected previously.

Measured on an annual-average basis, unemployment is expected to be 5.9 percent in 2003, unchanged from the forecast of three months ago-although the forecasters are associating slower growth this year with a higher forecast for unemployment next year. The current estimate for 2004 stands at 5.7 percent, marking an upward revision from 5.5 percent previously.

On the inflation front, the forecasters see prices rising at a slightly higher rate this year and a slightly lower rate next year than they predicted three months ago. Measured on a fourth-quarter over fourth-quarter basis, CPI inflation will average 2.4 percent in 2003, up from 2.2 percent previously, and 2.3 percent in 2004, down from 2.4 percent. On a year-over-year basis, inflation in the GDP price index will average 1.8 percent in 2003 and 2004. Previously, the forecasters thought GDP inflation would average 1.7 percent this year and 2.0 percent in 2004.

Interest Rates Are Seen at Lower Levels

The forecasters see interest rates over the next two years at levels lower than they predicted three months ago. On the short end of the maturity spectrum, the forecasters now predict the rate on three-month Treasury bills will average 1.2 percent in 2003, down from the forecast of 1.4 percent in the last survey. An even larger downward revision characterizes the outlook for next year: Currently, the three-month rate is expected to average 2.1 percent in 2004, down from 2.8 percent previously. On the long end, the rate on 10-year Treasury bonds will average 4.1 percent this year and 4.7 percent in 2004, both down from the previous forecasts of 4.3 percent and 5.1 percent, respectively.

Little Change in the Risk Assigned to a Negative Quarter

The current outlook is accompanied by little change in the forecasters' assessment of the risk of a negative quarter compared to their assessment in the previous survey. The forecasters are assigning a probability of 20 percent to a fall in real GDP in the current quarter, virtually unchanged from 21 percent in the previous survey. Though there is a bigger downward revision to the chance of negative growth in the third quarter-currently 14 percent, marking a downward revision from 18 percent previously-the risks over the following quarters are close to those assigned in the last survey.

No Change in Long-Term Expectations for Inflation

There is no change in the forecasters' long-term expectations for inflation. Measured by the annual average rate of change in CPI inflation over the next 10 years, the forecasters' current expectation stands at 2.50 percent, the same rate as in the last survey.

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.