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Tuesday, September 2, 2014

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Fourth Quarter 2013 Survey of Professional Forecasters

Steady Outlook for Growth with Healthier Labor Market

The outlook for growth in the U.S. economy is little changed from the survey of three months ago, according to 42 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The forecasters expect real GDP to grow at an annual rate of 1.8 percent this quarter and 2.5 percent next quarter and to rise to 2.9 percent in the second quarter of 2014. On an annual-average over annual-average basis, the forecasters see real GDP growing 1.7 percent in 2013, 2.6 percent in 2014, 2.8 percent in 2015, and 2.7 percent in 2016. These projections are nearly the same as those of three months ago.

The projections for unemployment over the next three years are slightly below those of the last survey. Unemployment is projected to be an annual average of 7.5 percent in 2013, before falling to 7.0 percent in 2014, 6.4 percent in 2015, and 6.0 percent in 2016.

On the employment front, the forecasters see higher growth in jobs over the next four quarters. The forecasters see nonfarm payroll employment growing at a rate of 187,300 jobs per month this quarter and 187,000 jobs per month next quarter. The forecasters’ projections for job gains on a monthly basis are 181,900 in 2013 and 189,900 in 2014, 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.)

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:
2013:Q4
2.3
1.8
7.3
7.2
178.6
187.3
2014:Q1
2.7
2.5
7.2
7.1
171.2
187.0
2014:Q2
2.9
2.9
7.1
7.0
185.4
193.5
2014:Q3
2.9
2.9
7.0
6.9
181.4
201.8
2014:Q4
N.A.
2.9
N.A.
6.8
N.A.
202.1
Annual data (projections are based on annual average levels):
2013
1.5
1.7
7.5
7.5
183.8
181.9
2014
2.6
2.6
7.1
7.0
180.1
189.9
2015
2.9
2.8
6.6
6.4
N.A.
N.A.
2016
2.5
2.7
6.1
6.0
N.A.
N.A.

The charts below provide some insight into the degree of uncertainty that 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 estimates of uncertainty about growth in 2014, 2015, and 2016 remained mostly unchanged from those of the previous survey.

The forecasters’ density projections, as shown in the charts below, shed light on the degree of uncertainty about the projections for unemployment. Each chart presents the forecasters’ previous and current estimates of the probability that unemployment will fall into each of 10 ranges. The forecasters have shifted the distributions of density to the left for 2014, 2015, and 2016, indicating their expectations of lower unemployment rates over those three years compared with their previous estimates.

Little Change in the Inflation Outlook

The forecasters expect current-quarter headline CPI inflation to average 1.6 percent, slightly lower than the last survey’s estimate of 1.7 percent. They predict current-quarter headline PCE inflation of 1.5 percent, down from 1.7 percent in the previous survey.

Measured on a fourth-quarter over fourth-quarter basis, headline CPI inflation is expected at levels unchanged from the previous survey: 1.4 percent in 2013, 2.0 percent in 2014, and 2.2 percent in 2015.

Forecasters see fourth-quarter over fourth-quarter headline PCE inflation at levels nearly unchanged from their projections of three months ago. They expect headline PCE inflation of 1.1 percent in 2013, 1.9 percent in 2014, and 1.9 percent in 2015.

Revisions to the projections for long-term inflation are also small. Over the next 10 years, 2013 to 2022, the forecasters expect headline CPI inflation to average 2.3 percent at an annual rate, up from 2.2 percent in the previous survey. The corresponding estimate for 10-year annual-average headline PCE inflation is 2.0 percent, unchanged from the survey of three months ago.

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
2013:Q4  
1.7
1.6
1.9
1.7
1.7
1.5
1.5
1.5
2014:Q1
1.8
1.8
2.0
1.9
1.8
1.8
1.7
1.7
2014:Q2
1.9
2.0
2.0
1.9
1.8
1.9
1.7
1.8
2014:Q3
2.1
2.0
2.0
2.0
1.9
1.9
1.8
1.7
2014:Q4
N.A.
2.1
N.A.
2.0
N.A.
1.9
N.A.
1.8
Q4/Q4 Annual Averages
2013
1.4
1.4
1.8
1.8
1.2
1.1
1.3
1.2
2014
2.0
2.0
2.0
2.0
1.8
1.9
1.8
1.7
2015
2.2
2.2
2.1
2.1
2.0
1.9
1.9
1.9
Long-Term Annual Averages
2013–2017
2.1
2.1
N.A.
N.A.
2.0
1.8
N.A.
N.A.
2013–2022
2.2
2.3
N.A.
N.A.
2.0
2.0
N.A.
N.A.

The charts below show the median projections (the red line) and the associated interquartile ranges (the gray area around the red line) for 10-year annual-average CPI and PCE inflation. The top panel highlights the small upward revision for long-term CPI inflation. The bottom panel shows the unchanged expectation for long-term 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 2013 and 2014 will fall into each of 10 ranges. For 2014, the forecasters see a slightly higher chance that inflation will fall below 1.5 percent than they estimated previously.

Little Change in the Risk of a Downturn in Real GDP

For the current quarter, the forecasters predict an 11.3 percent chance of negative growth. As the table below shows, the forecasters are keeping (nearly) unchanged their risk estimates for a downturn in the following quarters, compared with their previous estimates.

Risk of a Negative Quarter (%)
Survey Means
Quarterly data:
Previous
New
2013: Q4
11.2
11.3
2014: Q1
11.7
11.1
2014: Q2
11.5
11.6
2014: Q3
11.8
11.7
2014: Q4
N.A.
12.2

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

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.; Christine Chmura, Ph.D. and Xiaobing Shuai, Ph.D., Chmura Economics & Analytics; Gary Ciminero, CFA, GLC Financial Economics; Julia Coronado, BNP Paribas; David Crowe, National Association of Home Builders; Nathaniel Curtis, Navigant; Rajeev Dhawan, Georgia State University; Shawn Dubravac, Consumer Electronics Association; Gregory Daco, Oxford Economics USA, Inc.; Michael R. Englund, Action Economics, LLC; Timothy Gill, NEMA; Matthew Hall and Daniil Manaenkov, RSQE, University of Michigan; James Glassman, JPMorgan Chase & Co.; Jan Hatzius, Goldman Sachs;  Keith Hembre, Nuveen Asset Management; Peter Hooper, Deutsche Bank Securities, Inc.; IHS Global Insight; Fred Joutz, Benchmark Forecasts and Research Program on Forecasting, George Washington University; Sam Kahan, Kahan Consulting Ltd. (ACT Research LLC); N. Karp, BBVA Compass; Walter Kemmsies, Moffatt & Nichol; Jack Kleinhenz, Kleinhenz & Associates, Inc.; Thomas Lam, OSK-DMG/RHB; 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 and Arun Raha, Eaton Corporation; Anthony Metz, Pareto Optimal Economics; 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, Anima Sgr; Brendon Ogmundson, BC Real Estate Association; Martin A. Regalia, U.S. Chamber of Commerce; Philip Rothman, East Carolina University; Chris Rupkey, Bank of Tokyo-Mitsubishi UFJ; John Silvia, Wells Fargo; Allen Sinai, Decision Economics, Inc; Tara M. Sinclair, Research Program on Forecasting, George Washington University; David Sloan, Thomson Reuters; Sean M. Snaith, Ph.D., University of Central Florida; 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; Lea Tyler, Oxford Economics USA, Inc; Gary A. Wagner, Economic Forecasting Project, Old Dominion University; Richard Yamarone, Bloomberg, LP; Mark Zandi, Moody’s Analytics.

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

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Fourth Quarter 2013 PDF

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The survey for 2014 Q1 will be released on February 14, 2014.

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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