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Second Quarter 2019 Survey of Professional Forecasters

Forecasters See Lower Near-Term Growth

The outlook for growth in the U.S. economy over the next four quarters is slightly weaker than that in the last survey, according to 40 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The forecasters predict real GDP will grow at an annual rate of 1.9 percent this quarter and 2.1 percent next quarter, down from the previous estimates of 2.4 percent and 2.2 percent, respectively. On an annual-average over annual-average basis, the panel predicts real GDP will grow between 1.9 percent and 2.6 percent from 2019 to 2022.

A lower path for the unemployment rate accompanies the outlook for growth. The forecasters predict the unemployment rate will average between 3.6 percent and 3.9 percent from 2019 to 2022. Notably, the projections for 2021 and 2022 are both 0.3 percentage point below those from the last survey.

On the employment front, the forecasters have revised upward their estimates for job gains in 2019 and 2020. The projections for the annual-average level of nonfarm payroll employment suggest job gains at a monthly rate of 200,100 in 2019, up from the previous estimate of 191,800, and 142,300 in 2020, up from 123,200 estimated in the last survey. (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.) 

Median Forecasts for Selected Variables in the Current and Previous Surveys
 
Real GDP (%)
Unemployment Rate (%)
Payrolls (000s/month)
Previous
New
Previous
New
Previous
New
Quarterly data:
2019:Q2
2.4
1.9
3.7
3.7
156.8
190.5
2019:Q3
2.2
2.1
3.7
3.6
168.5
164.7
2019:Q4
2.2
2.2
3.7
3.6
142.1
154.9
2020:Q1
2.1
2.0
3.7
3.6
143.6
133.3
2020:Q2
N.A.
1.7
N.A.
3.6
N.A.
154.2
 
Annual data (projections are based on annual-average levels):
2019
2.4
2.6
3.7
3.7
191.8
200.1
2020
2.0
2.0
3.7
3.6
123.2
142.3
2021
1.8
1.9
4.0
3.7
N.A.
N.A.
2022
2.1
2.3
4.2
3.9
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 charts show the forecasters have revised upward their estimates of the probability that real GDP will grow between 2.0 percent and 2.9 percent in any of the next four years.

The forecasters’ density projections for unemployment, shown below, shed light on uncertainty about the labor market over the next four years. Each chart presents the forecasters’ current estimates of the probability that unemployment will fall into each of 10 ranges. The charts show the panelists are raising their density estimates for an unemployment rate below 4.0 percent in any of the next four years, especially in 2019 and 2020.

Forecasters Trim Their Projections for Near-Term Inflation

For 2019, the forecasters predict headline CPI inflation will be 1.9 percent, down from 2.0 percent previously; similarly, the panelists see headline PCE inflation at 1.7 percent, down 0.2 percentage point from the previous estimate.

The new near-term projections for core inflation also look weaker than they did in the previous survey. The forecasters expect current-year core CPI inflation to be 2.1 percent, down 0.2 percentage point from the previous estimate. Core PCE inflation for 2019 is expected to be 1.7 percent, down 0.3 percentage point from the previous estimate. The forecasters also see core CPI and core PCE inflation at other annual horizons at levels lower than those of the previous survey.

Notably, the long horizon inflation projections are holding steady. Over the next 10 years, 2019 to 2028, the forecasters expect headline CPI inflation to average 2.20 percent at an annual rate, unchanged from the previous estimate. The corresponding estimate for 10-year annual-average PCE inflation is 2.00 percent, also unchanged from the previous estimate.

Median 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
2019:Q2
2.3
2.4
2.2
2.1
2.1
2.2
2.0
1.7
2019:Q3
2.3
2.1
2.3
2.1
2.1
2.0
2.0
1.9
2019:Q4
2.2
2.1
2.3
2.1
2.1
2.0
2.0
1.9
2020:Q1
2.3
2.1
2.3
2.2
2.2
2.0
2.1
2.0
2020:Q2
N.A.
2.0
N.A.
2.2
N.A.
1.9
N.A.
2.0
 
Q4/Q4 Annual Averages
2019
2.0
1.9
2.3
2.1
1.9
1.7
2.0
1.7
2020
2.2
2.1
2.3
2.2
2.0
1.9
2.1
2.0
2021
2.2
2.2
2.3
2.2
2.1
2.0
2.0
1.9
 
Long-Term Annual Averages
2019-2023
2.13
2.10
N.A.
N.A.
2.00
1.96
N.A.
N.A.
2019-2028
2.20
2.20
N.A.
N.A.
2.00
2.00
N.A.
N.A.

The charts below show the median projections (the red line) and the associated interquartile ranges (gray areas around the red line) for the projections for 10-year annual-average CPI and PCE inflation. The charts highlight unchanged projections for the long-term inflation, compared with those of the last survey.

The figures below show the probabilities that the forecasters are assigning to each of 10 possible ranges for fourth-quarter over fourth-quarter core PCE inflation in 2019 and 2020. For both years, the forecasters have increased the probabilities that core PCE inflation will be below 2.0 percent, compared with their estimates in the previous survey.

Risk of Negative Current Quarter Holds (Nearly) Constant, While Longer-Horizon Risks Fall

The forecasters predict an 11.9 percent chance of negative growth in the current quarter, up slightly from 11.2 percent in the last survey. For the following three quarters, however, the panelists see a lower chance of a decline in real GDP.

Risk of a Negative Quarter (%)
Survey Means
Quarterly data: Previous New
2019:Q2
11.2
11.9
2019:Q3
14.5
13.1
2019:Q4
17.9
15.8
2020:Q1
21.9
19.4
2020:Q2
N.A.
22.8

Technical Notes

Moody's Aaa and Baa Historical Rates

The historical values of Moody's Aaa and Baa rates are proprietary and, therefore, not available in the data files on the Bank’s website or on the tables that accompany the survey’s complete write-up in the PDF.

Lewis Alexander, Nomura Securities; Scott Anderson, Bank of the West (BNP Paribas Group); Robert J. Barbera, Johns Hopkins University Center for Financial Economics; Peter Bernstein, RCF Economic and Financial Consulting, Inc.; Wayne Best and Michael Brown, Visa, Inc.; Jay Bryson, Wells Fargo; Christine Chmura, Ph.D., and Xiaobing Shuai, Ph.D., Chmura Economics & Analytics; Gary Ciminero, CFA, GLC Financial Economics; Nathaniel Curtis, Ankura Consulting Group, LLC; Gregory Daco, Oxford Economics USA, Inc.; Rajeev Dhawan, Georgia State University; Bill Diviney, ABN AMRO Bank NV; Gabriel Ehrlich, Daniil Manaenkov, Owen Nie, and Aditi Thapar, RSQE, University of Michigan; Michael R. Englund, Action Economics, LLC; J.D. Foster, U.S. Chamber of Commerce; Michael Gapen, Barclays Capital; Sacha Gelfer, Bentley University; James Glassman, JPMorgan Chase & Co.; Jan Hatzius, Goldman Sachs; Keith Hembre, Nuveen Asset Management; Peter Hooper, Deutsche Bank Securities, Inc.; Fred Joutz, Benchmark Forecasts; Sam Kahan, Kahan Consulting Ltd. (ACT Research LLC); N. Karp, BBVA Research USA; Walter Kemmsies, Jones Lang LaSalle; Jack Kleinhenz, Kleinhenz & Associates, Inc.; Thomas Lam, Sim Kee Boon Institute, Singapore Management University; L. Douglas Lee, Economics from Washington; John Lonski, Moody’s Capital Markets Group; Macroeconomic Advisers, IHS Markit; Robert McNab, Old Dominion University; R. Anthony Metz, Pareto Optimal Economics; R. M. Monaco, TitanRM; Michael Moran, Daiwa Capital Markets America; Joel L. Naroff, Naroff Economic Advisors; Mark Nielson, Ph.D., MacroEcon Global Advisors; Brendon Ogmundson, BC Real Estate Association; Arun Raha and Maira Trimble, Eaton Corporation; Philip Rothman, East Carolina University; Chris Rupkey, MUFG Union Bank; Sean M. Snaith, Ph.D., University of Central Florida; Constantine G. Soras, Ph.D., CGS Economic Consulting/Montclair State University; Stephen Stanley, Amherst Pierpont Securities; Charles Steindel, Ramapo College of New Jersey; Susan M. Sterne, Economic Analysis Associates, Inc.; James Sweeney, Credit Suisse; Mark Zandi, Moody’s Analytics; Ellen Zentner, Morgan Stanley.

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Second Quarter 2019 PDF

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