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Second Quarter 2009 Survey of Professional Forecasters

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

Forecasters Expect Lower Growth and Higher Unemployment over the Next Two Years

The economy looks weaker now than it did in February, according to 51 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The forecasters project lower real GDP growth and higher unemployment rates in 2009 and 2010 than they did three months ago. In the current year, the forecasters see the economy contracting at a rate of 2.8 percent (annual-average over annual-average) — a downward revision of 0.8 percentage point from their forecast of 2.0 percent made three months ago. The panelists expect the economy in 2010 to expand 2.0 percent, down from their projection of 2.2 percent in the last survey. In answer to this survey's special questions (described in the section below), the forecasters report that real GDP will expand 2.7 percent in 2011 and 3.0 percent in 2012. On a quarterly basis, the forecasters expect a contraction at an annual rate of 1.5 percent in the current quarter, followed by growth over the next four quarters, from 0.4 percent in the third quarter of 2009 to 2.9 percent in the second quarter of 2010.

An upward revision to the forecast for the unemployment rate accompanies the outlook for economic growth. The forecasters predict that unemployment will increase from 9.1 percent this quarter to 9.8 percent in the first quarter of 2010. Previously, unemployment was forecast to rise from 8.3 percent to 9.0 percent over the same period. Unemployment is expected to average 9.1 percent this year and rise to 9.6 percent in 2010. In answer to special questions, the forecasters predict that annual-average unemployment will fall to 8.7 percent in 2011 and 7.7 percent in 2012. On the jobs front, the forecasters project job losses in the current quarter at a rate of 521,500 per month. They also see a reduction in jobs of 282,500 per month in the third quarter and 104,700 in the fourth quarter of 2009. They previously projected monthly job losses of 311,200, 202,100, and 43,000 in the second quarter, the third quarter, and the fourth quarter of 2009, respectively. On an annual-average basis, jobs are expected to decline 422,600 per month in 2009 and 13,900 in 2010.

Extended Annual Forecast for Real GDP and Unemployment and Additional Probability Questions

We added a few special questions in this survey. We asked the panelists to provide two more years of annual forecasts for the civilian unemployment rate and real GDP. We also added new questions on probabilities for both variables. In addition, we expanded the number of ranges of possible growth in real GDP. The results of the special questions are summarized in accompanying page.

The charts below provide some information on the degree of uncertainty the forecasters have about year-over-year growth in real GDP. Each chart presents the forecasters' estimates of the probability that growth will fall into each of 11 ranges. For 2009, the forecasters pegged their estimates that growth will be between -3.0 percent to -2.1 percent at 46 percent. The forecasters see only a 3 percent chance that year-over-year growth in 2009 will fall in the positive range. For 2010, the forecasters predict a 90 percent chance that year-over-year growth will be positive. For 2011 and 2012, the economy is expected to further improve, and the forecasters see a 96 percent chance of positive year-over-year growth in both years.

The charts below provide some information on the degree of uncertainty the forecasters have about unemployment rates. Each chart presents the forecasters' estimates of the probability that unemployment will fall into each of 10 ranges. For 2009, the forecasters pegged their estimates that unemployment will be greater than or equal to 8.0 percent at 99 percent. For 2010, the forecasters predict a 95 percent chance that unemployment will be in the same range. The forecasters see further recovery in 2011 and 2012. They predict a 78 percent chance that unemployment will be greater than or equal to 8.0 percent in 2011 and a 47 percent chance in 2012 over the same range.

The table below summarizes the forecasts for real GDP and the labor market and compares the current projections with those of three months ago.

 
Real GDP (%)
Unemployment
Rate (%)
Payrolls
(000s/month)
 
Previous
New
Previous
New
Previous
New
Quarterly data:
2009:Q2
-1.8
-1.5
8.3
9.1
-311.2
-521.5
Q3
1.0
0.4
8.7
9.6
-202.1
-282.5
Q4
1.8
1.7
8.9
9.8
-43.0
-104.7
2010:Q1
2.4
2.2
9.0
9.8
38.7
19.9
Q2
N.A.
2.9
N.A.
9.7
N.A.
103.2
Annual average data:
2009
-2.0
-2.8
8.4
9.1
-328.4
-422.6
2010
2.2
2.0
8.8
9.6
6.2
-13.9
2011
N.A.
2.7
N.A.
8.7
N.A.
N.A.
2012
N.A.
3.0
N.A.
7.7
N.A.
N.A.

Downward Revision for Core CPI Inflation in 2010 and 2011

The forecasters predict core CPI inflation (fourth-quarter over fourth-quarter) in 2009 to be at 1.3 percent, up slightly from 1.2 percent in the last survey. However, the outlook for core CPI inflation in 2010 and 2011 is at levels below those forecast in the last survey. Core CPI inflation is expected to increase from 1.4 percent in 2010 to 1.9 percent in 2011, down from the previous estimates of 1.6 percent and 2.0 percent over the same periods (not shown in the table below). The forecasters predict core PCE inflation in 2009 at 1.3 percent, up from 1.1 percent in the last survey. The forecasters see little change to core PCE inflation in 2010 and 2011 from the last survey.

Over the next 10 years, 2009 to 2018, the forecasters expect headline CPI inflation to average 2.5 percent at an annual rate, while headline PCE inflation will average 2.3 percent. These estimates are slightly higher than those from the last survey, when the forecasters predicted that inflation over the same 10-year period would average 2.4 percent in the CPI and 2.2 percent in the PCE price index (not shown).

Short-Run and Long-Run Projections for Inflation
 
CPI (%)
PCE Price Index (%)
 
Headline
Core
Headline
Core
Quarterly data:
2009:Q2
0.7
1.5
0.9
1.5
Q3
1.6
1.3
1.3
1.2
Q4
1.5
1.3
1.2
1.1
2010:Q1
1.8
1.3
1.5
1.1
Q2
2.0
1.5
1.7
1.4
Fourth-quarter over fourth-quarter data:
2009
0.4
1.3
0.6
1.3
2010
1.8
1.4
1.7
1.4
2011
2.2
1.9
2.0
1.7
Long-run projections:
2009-2013
2.2
N.A.
2.0
N.A.
2009-2018
2.5
N.A.
2.3
N.A.

The figures below show the probabilities that the forecasters are assigning to the possibility that fourth-quarter over fourth-quarter core PCE inflation in 2009 and 2010 will fall into each of 10 ranges. For 2009, the forecasters have raised the probability that inflation will be greater than or equal to 1.0 percent. For 2010, the forecasters are assigning a 50 percent probability that inflation will fall into the range of 1.0 percent to 1.9 percent.

Increased Risk of a Downturn over the Next Two Quarters

The risk of a quarter of negative growth over the next two quarters has increased. For the current quarter, the forecasters predict a 79 percent chance of negative growth, up from 74 percent in the survey of three months ago. The forecasters see a 47 percent chance of negative growth in the third quarter of 2009, up from 45 percent previously.

Risk of a Negative Quarter (%)
 
Previous
New
Quarterly data:
2009:Q2
74.0
78.9
Q3
44.7
46.5
Q4
29.9
26.9
2010:Q1
21.6
17.5
Q2
N.A.
14.4

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

Scott Anderson, Wells Fargo and Company; Robert J. Barbera, ITG Inc.; Jack L. Bishop Jr., Ph.D., Kingsbury International Ltd.; 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; Joan Crary and Stanley Sedo, RSQE, University of Michigan; David Crowe, National Association of Home Builders; Richard DeKaser, National City Corporation; Rajeev Dhawan, Georgia State University; Shawn Dubravac, Consumer Electronics Association; Michael R. Englund, Action Economics, LLC; Fannie Mae; Gerard F. Fuda, Independent Economist; Stephen Gallagher, Societe Generale; James Glassman, JP Morgan Chase & Co.; IHS Global Insight; Jeoff Hall, Thomson Financial, IFR; Ethan Harris and Dean Maki, Barclays Capital; Keith Hembre, First American Funds; Peter Hooper, Deutsche Bank Securities, Inc.; William B. Hummer, Wayne Hummer Investments; Fred Joutz, Benchmark Forecasts and Research Program on Forecasting, George Washington University; Kurt Karl, Swiss Re; Nathaniel Karp, BBVA-Compass; Walter Kemmsies and Daniel Solomon, Moffatt & Nichol; Jack Kleinhenz, Kleinhenz & Associates, Inc.; Thomas Lam, UOB Group; L. Douglas Lee, Economics from Washington; Mickey D. Levy, Bank of America; Joseph Liro, Stone & McCarthy Research Associates; John Lonski, Moody's Investors Service; Macroeconomic Advisers, LLC; Edward F. McKelvey, Goldman Sachs; Jim Meil, Eaton Corporation; Merrill Lynch; Anthony Metz, Pareto Optimal Economics; Ardavan Mobasheri and Danielle Ferry, American International Group; Michael Moran, Daiwa Securities America; Joel L. Naroff, Naroff Economic Advisors; Mark Nielson, Ph.D., MacroEcon Global Advisors; Michael P. Niemira, International Council of Shopping Centers; Luca Noto, Monte Paschi Asset Management; Martin A. Regalia, U.S. Chamber of Commerce; David Resler, Nomura Securities International, Inc.; John Silvia, Wachovia Corporation; 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, RBS Greenwich Capital; Susan M. Sterne, Economic Analysis Associates, Inc.; Thomas Kevin Swift, American Chemistry Council; Lea Tyler, Oxford Economics USA, Inc.; Albert M. Wojnilower; Richard Yamarone, Argus Research Group; Mark Zandi, Economy.com; 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.

Second Quarter 2009 PDF

View panelists' responses to special questions on an extended horizon for real GDP and unemployment. Excel spreadsheet

Next Survey Release

The survey for 2009 Q3 will be released on August 14, 2009.

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

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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