skip navigation

Friday, August 1, 2014

[ – ] Text Size [ + ]  |  Print Page

First Quarter 2011 Survey of Professional Forecasters

Listen to an interview with a research analyst about this quarter's survey. Audio Interview

Forecasters See Stronger Growth in 2011 and 2012

The outlook for growth in the U.S. economy looks more positive now than it did just three months ago, according to 43 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The panel expects real GDP to grow at an annual rate of 3.6 percent this quarter, up from the previous estimate of 2.4 percent. On an annual-average over annual-average basis, the forecasters predict faster real GDP growth in 2011 and 2012. The forecasters see real GDP growing 3.2 percent in 2011, up from their prediction of 2.5 percent in the last survey. The forecasters predict real GDP will grow 3.1 percent in 2012, higher than their prediction of 2.9 percent in the last survey. For 2013, the forecast for real GDP growth is unchanged from the last survey at 3.0 percent.

The positive revision to growth is accompanied by a brighter outlook for the unemployment rate. Unemployment is projected to be an annual average of 9.1 percent in 2011, 8.5 percent in 2012, and 7.8 percent in 2013. These estimates are lower than the projections in the last survey. On the employment front, the forecasters have revised upward the growth in jobs over the next four quarters. The forecasters see nonfarm payroll employment growing at a rate of 129,100 jobs per month this quarter and 188,300 jobs per month next quarter. The forecasters’ projections for the annual-average level of nonfarm payroll employment suggest job gains at a monthly rate of 134,900 in 2011 and 226,100 in 2012, as the table below shows. (These annual-average estimates are computed as the year-to-year change in the annual-average level of nonfarm payroll employment, converted to a monthly rate.)

 
Real GDP (%)
Unemployment
Rate (%)
Payrolls
(000s/month)
 
Previous
New
Previous
New
Previous
New
Quarterly data:
2011:Q1
2.4
3.6
9.5
9.3
104.2
129.1
2011:Q2
2.7
3.5
9.4
9.2
144.3
188.3
2011:Q3
3.3
3.1
9.2
9.0
139.8
201.1
2011:Q4
2.9
3.4
9.0
8.8
170.6
213.1
2012:Q1
N.A.
3.1
N.A.
8.7
N.A.
201.4
Annual data (projections are based on annual-average levels):
2011
2.5
3.2
9.3
9.1
105.5
134.9
2012
2.9
3.1
8.7
8.5
N.A.
226.1
2013
3.0
3.0
7.9
7.8
N.A.
N.A.
2014
N.A.
3.4
N.A.
7.3
N.A.
N.A.

The charts below provide some insight into the degree of uncertainty the forecasters have about their projections for the rate of growth in the annual-average level of real GDP. Each chart presents the forecasters’ previous and current estimates of the probability that growth will fall into each of 11 ranges. The forecasters have revised upward their estimate of the probability that growth will fall into the range of 3.0 to 4.9 percent in 2011, 2012, and 2013.

The forecasters’ density projections, as shown in the charts below, shed light on the odds of a recovery in the labor market over the next four years. Each chart presents the forecasters’ previous and current estimates of the probability that unemployment will fall into each of 10 ranges. The forecasters have reduced the estimate of the probability that the annual average unemployment rate will be greater than 9.5 percent in 2011, 2012, and 2013 compared with their previous estimate.

Little Change in the Long-Term Expectations for Inflation

The forecasters expect current-quarter headline CPI inflation to average 2.5 percent, up from the last survey’s estimate of 1.6 percent. The forecasters also predict a higher current-quarter headline PCE inflation of 2.0 percent, up from the last survey’s estimate of 1.5 percent. However, the current outlook for the headline and core measures of CPI and PCE inflation during the next two years remains mostly unchanged. Measured on a fourth-quarter over fourth-quarter basis, headline CPI inflation is expected to average 1.7 percent in 2011 and 2.0 percent in 2012, slightly higher than the forecast of 1.6 percent and 1.9 percent, respectively, in the last survey. Forecasters expect fourth-quarter over fourth-quarter headline PCE inflation to average 1.6 percent in 2011, up from 1.4 percent in the last survey, and 1.8 percent in 2012, unchanged from the previous estimate.

Over the next 10 years, 2011 to 2020, the forecasters expect headline CPI inflation to average 2.30 percent at an annual rate. This estimate is up slightly from the last survey, when the forecasters thought headline CPI inflation over the 10-year period from 2010 to 2019 would average 2.20 percent.

Short-Run and Long-Run Projections for Inflation (Annualized Percentage Points)
 
Headline CPI
Core CPI
Headline PCE
Core PCE
Previous
Current
Previous
Current
Previous
Current
Previous
Current
Quarterly
2011:Q1
1.6
2.5
1.1
1.0
1.5
2.0
1.1
1.0
2011:Q2
1.3
1.3
1.3
1.2
1.2
1.3
1.1
1.3
2011:Q3
1.8
1.8
1.3
1.3
1.4
1.5
1.2
1.3
2011:Q4
1.8
1.8
1.5
1.4
1.6
1.5
1.3
1.4
2012:Q1
N.A.
2.0
N.A.
1.6
N.A.
1.8
N.A.
1.5
Q4/Q4 Annual Averages
2011
1.6
1.7
1.3
1.3
1.4
1.6
1.2
1.3
2012
1.9
2.0
1.7
1.7
1.8
1.8
1.6
1.6
2013
N.A.
2.1
N.A.
1.9
N.A.
1.9
N.A.
1.7
Long-Term Annual Averages
2010-2014
2.00
N.A.
N.A.
N.A.
1.80
N.A.
N.A.
N.A.
2011-2015
N.A.
2.10
N.A.
N.A.
N.A.
1.91
N.A.
N.A.
2010-2019
2.20
N.A.
N.A.
N.A.
2.00
N.A.
N.A.
N.A.
2011-2020
N.A.
2.30
N.A.
N.A.
N.A.
2.10
N.A.
N.A.

The charts below show the median forecasts (the red line) and the associated interquartile ranges (the gray area around the red line) for the projections for the 10-year annual-average CPI and PCE inflation. The forecast begins in Q4 1991 for 10-year CPI inflation and in Q1 2007 for 10-year PCE inflation.

The figures below show the probabilities that the forecasters are assigning to the possibility that fourth-quarter over fourth-quarter core PCE inflation in 2011 and 2012 will fall into each of 10 ranges. For 2011, the forecasters assign a higher chance than previously that core PCE inflation will fall in the range of 0.5 to 1.9 percent.

Small Risk of a Negative Quarter

The forecasters have revised downward the chance of a contraction in real GDP in any of the next four quarters. For the current quarter, they predict a 6.3 percent chance of negative growth, down from 12.9 percent in the survey of three months ago. As the table below shows, the panelists have also made downward revisions to their forecasts for the following three quarters.

Risk of a Negative Quarter (%)
 
Previous
New
Quarterly data:
2011: Q1
12.9
6.3
2011: Q2
13.6
7.1
2011: Q3
13.2
9.3
2011: Q4
13.8
10.7
2012: Q1
N.A.
11.4

Forecasters State Their Views on House Prices

In this survey, a special question asked panelists to provide their forecasts for fourth-quarter over fourth-quarter growth in house prices, as measured by a number of alternative indices. The panelists were allowed to choose from a provided list of indices or to write in their own index. For each index of their choosing, the panelists provided forecasts of growth in 2011 and 2012.

Twenty-five panelists answered the special question. Some panelists provided projections for more than one index. The table below provides a summary of the forecasters’ responses. For some indices, the number of responses (N) is very small. The median estimates for the seven house-price indices listed in the table below range from -3.3 percent to 0.4 percent in 2011 and 1.4 percent to 3.7 percent in 2012.

Projections for Growth in Various Indices of House Prices
Q4/Q4, Percentage Points

Index
2011
(Q4/Q4 Percent Change)
2012
(Q4/Q4 Percent Change)
N
Mean
Median
N
Mean
Median
S&P/Case-Shiller: U.S. National
13
-0.6
0.4
13
1.3
2.0
S&P/Case-Shiller: Composite 10
2
-0.9
-0.9
2
2.1
2.1
S&P/Case-Shiller: Composite 20
6
-0.9
-0.6
6
1.0
1.4
FHFA: U.S. Total
6
-1.0
-1.3
6
3.5
3.7
FHFA: Purchase Only
6
-1.1
-2.3
6
2.1
1.8
CoreLogic: National HPI, incl Distressed Sales (Single Family Combined)
4
-0.4
-0.2
3
1.1
2.3
NAR Median: Total Existing
2
-3.3
-3.3
2
2.6
2.6

Upward Revisions to Long-Term Output Growth and Stock Returns

In first-quarter surveys, the forecasters provide their long-run projections for an expanded set of variables, including growth in output and productivity, as well as returns on financial assets. As the table below shows, the forecasters have increased their long-run estimates for the annual-average rate of growth in real GDP. Currently, the forecasters expect real GDP to grow 2.84 percent per year over the next 10 years, up from 2.70 percent in the survey of 2010 Q1. The forecasters predict the S&P 500 returning 7.25 percent per year, up from 7.00 percent. A downward revision to bond returns accompanies the current outlook. The forecasters see 10-year Treasuries returning 4.88 percent per year, down from 4.95 percent. The forecasters continue to expect that three-month Treasury bills will return 3.0 percent per year over the next 10 years. Productivity growth is also expected to remain unchanged at 2.0 percent per year.

Long-Term (10-year) Forecasts (%)
 
First Quarter 2010
Current Survey
Real GDP Growth
2.70
2.84
Productivity Growth
2.00
2.00
Stock Returns (S&P 500)
7.00
7.25
Bond Returns (10-year)
4.95
4.88
Bill Returns (3-month)
3.00
3.00

The Federal Reserve Bank of Philadelphia thanks the following forecasters for their participation in our surveys:

Robert J. Barbera, Mount Lucas Management; Jay Brinkmann, Mortgage Bankers Association; Joseph Carson, Alliance Capital Management; Christine Chmura, Ph.D. and Xiaobing Shuai, Ph.D., Chmura Economics & Analytics; Gary Ciminero, CFA, GLC Financial Economics; David Crowe, National Association of Home Builders; Rajeev Dhawan, Georgia State University; Shawn Dubravac, Consumer Electronics Association; Michael R. Englund, Action Economics, LLC; Robert C. Fry, Jr., DuPont; Stephen Gallagher, Societe Generale; Timothy Gill, NEMA; James Glassman, JPMorgan Chase & Co.; Ethan Harris, Bank of America-Merrill Lynch; Peter Hooper, Deutsche Bank Securities, Inc.; William B. Hummer, Wayne Hummer Investments; IHS Global Insight; Peter Jaquette, PIRA Energy Group; Fred Joutz, Benchmark Forecasts and Research Program on Forecasting, George Washington University; Kurt Karl, Swiss Re; N. Karp, BBVA Compass; Walter Kemmsies, Moffatt & Nichol; Jack Kleinhenz, Kleinhenz & Associates, Inc.; Thomas Lam, OSK Group/DMG & Partners; L. Douglas Lee, Economics from Washington; Allan R. Leslie, Economic Consultant; John Lonski, Moody’s Capital Markets Group; Macroeconomic Advisers, LLC; Dean Maki, Barclays Capital; Jim Meil, Eaton Corporation; Anthony Metz, Pareto Optimal Economics; Ardavan Mobasheri, AIG Global Economic Research; Michael Moran, Daiwa Capital Markets America; Joel L. Naroff, Naroff Economic Advisors; Mark Nielson, Ph.D., MacroEcon Global Advisors; Michael P. Niemira, International Council of Shopping Centers; Luca Noto, Prima Sgr; Martin A. Regalia, U.S. Chamber of Commerce; David Resler, Nomura Securities International, Inc.; Philip Rothman, East Carolina University; John Silvia, Wells Fargo; Allen Sinai, Decision Economics, Inc; Tara M. Sinclair, Research Program on Forecasting, George Washington University; Sean M. Snaith, Ph.D., University of Central Florida; Constantine G. Soras, Ph.D., CGS Economic Consulting; Neal Soss, Credit Suisse; Stephen Stanley, Pierpont Securities; Charles Steindel, New Jersey Department of the Treasury; Susan M. Sterne, Economic Analysis Associates, Inc.; Thomas Kevin Swift, American Chemistry Council; Andrew Tilton and Edward F. McKelvey, Goldman Sachs; Lea Tyler, Oxford Economics USA, Inc.; Jay N. Woodworth, Woodworth Holdings, Ltd.; Mark Zandi, Moody’s Analytics; Ellen Beeson Zentner, Bank of Tokyo-Mitsubishi UFJ, Ltd.

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

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

View Complete WRiteup

A complete writeup of this survey, including all tables, is available in PDF format.

First Quarter 2011 PDF

Next Survey Release

The survey for 2011 Q2 will be released on May 13, 2011.

For more up-to-date information, please view the SPF release schedule.

E-Mail Notification

Subscribe to the survey through our e-mail notification system.

Sign Up

Contact Us

For further information about the Survey of Professional Forecasters, contact:

Tom Stark
Federal Reserve Bank of Philadelphia
Ten Independence Mall
Philadelphia, PA 19106
PHIL.SPF@phil.frb.org E-mail