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Second Quarter 2010 Survey of Professional Forecasters

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

Forecasters See Stronger Recovery

The outlook for the U.S. economy over the next few quarters looks stronger now than it did just three months ago, according to 44 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The forecasters predict real GDP will grow at an annual rate of 3.3 percent over each of the next two quarters, up from the previous estimate of 2.7 percent. On an annual-average over annual-average basis, the forecasters expect more robust real GDP growth in 2010 and 2011, but slower real GDP growth in 2012 and 2013.The forecasters see real GDP growing 3.3 percent in 2010, up from their prediction of 3.0 percent in the last survey. The forecasters predict real GDP will grow 3.1 percent in 2011, 3.2 percent in 2012, and 2.9 percent in 2013.

Stronger conditions in the labor market accompany the outlook for growth. Unemployment is now projected to be an annual average of 9.6 percent in 2010, before falling to 8.9 percent in 2011, 8.0 percent in 2012, and 7.1 percent in 2013. On the jobs 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 207,300 jobs per month this quarter and 120,500 jobs per month next quarter. Both estimates mark strong upward revisions from the previous survey. Over the first half of 2011, jobs will grow at an average rate of 215,500 per month. The forecasters' projections for the annual average level of nonfarm payroll employment suggest job losses at a lowered monthly rate of 37,500 in 2010. Job gains in 2011 are seen averaging 184,000 per month, 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:
2010:Q2
2.7
3.3
9.9
9.8
117.6
207.3
Q3
2.7
3.3
9.8
9.6
69.3
120.5
Q4
2.7
2.8
9.7
9.5
122.2
153.3
2011:Q1
2.7
2.7
9.4
9.3
143.4
213.8
Q2
N.A.
3.2
N.A.
9.1
N.A.
217.3
Annual average data:
2010
3.0
3.3
9.8
9.6
-59.0
-37.5
2011
2.9
3.1
9.2
8.9
141.8
184.0
2012
3.4
3.2
8.3
8.0
N.A.
N.A.
2013
3.1
2.9
7.3
7.1
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 3.9 percent in 2010, 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 raised the estimate of the probability that the annual average unemployment rate will be below 9.0 percent in 2010, 2011, 2012, and 2013 compared with their previous estimates.

Long-Term Expectations of Inflation Hold Steady

The current outlook for the headline and core measures of CPI and PCE inflation during the next two years is a little lower than it was in the last survey. Over the next 10 years, 2010 to 2019, the forecasters expect headline CPI inflation to average 2.40 percent at an annual rate. This estimate is almost identical to that of the last survey. The 10-year outlook for PCE inflation of 2.15 percent is slightly higher than that of the last survey.

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
2010:Q2
1.4
1.4
1.4
1.0
1.2
1.1
1.3
1.1
Q3
1.8
1.8
1.5
1.4
1.7
1.7
1.3
1.2
Q4
1.9
1.8
1.5
1.5
1.8
1.6
1.4
1.3
2011:Q1
2.1
1.9
1.6
1.5
1.8
1.8
1.5
1.4
Q2
N.A.
2.0
N.A.
1.6
N.A.
1.7
N.A.
1.5
Q4/Q4 Annual Averages
2010
1.7
1.6
1.4
1.0
1.4
1.4
1.3
1.2
2011
2.1
2.0
1.7
1.6
1.8
1.8
1.5
1.6
2012
2.3
2.4
2.0
2.0
2.0
2.0
1.9
1.8
Long-Term Annual Averages
2010-2014
2.20
2.19
N.A.
N.A.
1.80
1.80
N.A.
N.A.
2010-2019
2.39
2.40
N.A.
N.A.
2.10
2.15
N.A.
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 2010 and 2011 will fall into each of 10 ranges. The forecasters see a higher chance than they previously assigned that core PCE inflation in 2010 will fall below 1.5 percent. For 2011, the forecasters are assigning a lower probability of inflation falling into the range above 2.0 percent.

Reduced Risk of a Negative Quarter

The risk of a contraction continues to diminish. The forecasters have revised downward the chance of a contraction in real GDP in any of the next four quarters. They have cut their estimate of the risk of a downturn this quarter to 7.4 percent compared with 11.6 percent previously. 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:
2010:Q2
11.6
7.4
Q3
13.2
9.8
Q4
14.0
12.3
2011:Q1
14.8
14.1
Q2
N.A
14.8

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

Robert J. Barbera, ITG Inc.; 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; Gerard F. Fuda, Independent Economist; Stephen Gallagher, Societe Generale; Timothy Gill, NEMA; James Glassman, JP Morgan 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 and Daniel Solomon, 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; Edward F. McKelvey, Goldman Sachs; Jim Meil, Eaton Corporation; Anthony Metz, Pareto Optimal Economics; Ardavan Mobasheri and Danielle Ferry, AIG Global Economic Research; Michael Moran, Daiwa Capital Markets America; Joel L. Naroff, Naroff Economic Advisors; Herbert E. Neil, Financial and Economic Strategies Corp.; 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; Susan M. Sterne, Economic Analysis Associates, Inc.; Thomas Kevin Swift, American Chemistry Council; Lea Tyler, Oxford Economics USA, Inc.; Jay N. Woodworth, Woodworth Holdings, Ltd.; Mark Zandi, Moody's 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.

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Second Quarter 2010 PDF

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The survey for 2010 Q3 will be released on August 13, 2010.

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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