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Second Quarter 2015 Survey of Professional Forecasters

Weaker Outlook for Growth

The outlook for growth in the U.S. economy over the next three years looks weaker now than it did in February, according to 44 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The forecasters predict real GDP will grow at an annual rate of 2.5 percent this quarter and 3.1 percent next quarter. On an annual-average over annual-average basis, real GDP will grow 2.4 percent in 2015, down 0.8 percentage point from the previous estimate. The forecasters predict real GDP will grow 2.8 percent each in 2016 and 2017, and 2.5 percent in 2018.

A slightly brighter outlook for unemployment accompanies the weaker outlook for growth. The forecasters predict that the unemployment rate will be an annual average of 5.4 percent in 2015, before falling to 5.0 percent in 2016, and 4.8 percent each in 2017 and 2018. The projections for 2016, 2017, and 2018 are slightly below those of the last survey.

The panelists have revised downward their estimates for job gains in 2015 and 2016. The forecasters see nonfarm payroll employment growing at a rate of 195,300 jobs per month this quarter, 223,300 jobs per month next quarter, and 223,000 jobs per month in the fourth quarter of 2015. The forecasters’ projections for the annual-average level of nonfarm payroll employment suggest job gains at a monthly rate of 243,900 in 2015 and 180,100 in 2016, 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:
2015:Q2
3.0
2.5
5.5
5.4
233.8
195.3
2015:Q3
2.8
3.1
5.4
5.3
222.0
223.3
2015:Q4
2.8
2.9
5.2
5.2
229.4
223.0
2016:Q1
2.9
2.4
5.2
5.1
213.8
177.0
2016:Q2
N.A.
3.0
N.A.
5.0
N.A.
178.3
 
Annual Data (projections are based on annual-average levels):
2015
3.2
2.4
5.4
5.4
252.5
243.9
2016
2.9
2.8
5.1
5.0
213.6
180.1
2017
2.7
2.8
5.0
4.8
N.A.
N.A.
2018
2.7
2.5
4.9
4.8
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. For 2015, the forecasters are more confident now than they were three months ago that growth will average between 2.0 and 2.9 percent.

The forecasters’ density projections for unemployment, shown below, shed light on uncertainty about the labor market over the next four years. Each chart for unemployment presents the forecasters’ current estimates of the probability that unemployment will fall into each of 10 ranges. The charts show that the forecasters are raising their density estimates at the lower levels of unemployment outcomes in 2015 and 2016, suggesting they are more confident about lower unemployment over the next two years than they were in the last survey.

Higher Headline Inflation in the Current Quarter but Lower Inflation in 2015

The forecasters expect current-quarter headline CPI inflation to average 1.9 percent, higher than the last survey’s estimate of 1.6 percent. The forecasters predict current-quarter headline PCE inflation of 1.6 percent, higher than the prediction of 1.4 percent from the survey of three months ago.

At the same time, the forecasters see lower headline inflation in 2015. Measured on a fourth-quarter over fourth-quarter basis, headline CPI inflation is expected to average 0.7 percent in 2015, down from 1.1 percent in the last survey. Forecasters expect fourth-quarter over fourth-quarter headline PCE inflation to average 0.8 percent in 2015, also down from 1.1 percent in the last survey.

Over the next 10 years, 2015 to 2024, the forecasters expect headline CPI inflation to average 2.14 percent at an annual rate. The corresponding estimate for 10-year annual-average PCE inflation is 1.98 percent.

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
2015:Q2
1.6
1.9
1.7
1.8
1.4
1.6
1.4
1.5
2015:Q3
1.9
2.0
1.8
1.8
1.9
1.7
1.5
1.5
2015:Q4
2.0
1.9
1.8
1.9
1.8
1.7
1.7
1.6
2016:Q1
2.1
1.9
1.9
1.9
1.8
1.7
1.6
1.7
2016:Q2
N.A.
2.1
N.A.
2.0
N.A.
1.9
N.A.
1.7
 
Q4/Q4 Annual Averages
2015
1.1
0.7
1.7
1.8
1.1
0.8
1.4
1.4
2016
2.1
2.1
1.9
2.0
1.9
1.9
1.7
1.7
2017
2.3
2.3
2.1
2.1
2.1
1.9
1.9
1.9
 
Long-Term Annual Averages
2015 – 2019
2.00
2.00
N.A.
N.A.
1.80
1.80
N.A.
N.A.
2015 – 2024
2.10
2.14
N.A.
N.A.
2.00
1.98
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 shows a slightly higher level of the long-term projection for CPI inflation, at 2.14 percent. The bottom panel highlights the little changed 10-year forecast for PCE inflation, at 1.98 percent.

The figures below show the probabilities that the forecasters are assigning to the possibility that fourth-quarter over fourth-quarter core PCE inflation in 2015 and 2016 will fall into each of 10 ranges. For both years, the forecasters assign a higher chance than they previously predicted that core PCE inflation will be between 1.0 to 1.9 percent.

Risk of a Negative Quarter Remains Low

For the current quarter, the forecasters predict an 11.2 percent chance of negative growth. As the table below shows, the forecasters have made small changes to their risk estimates for the third and fourth quarters of 2015, compared with their previous estimates.

Risk of a Negative Quarter (%)
Survey Means
Quarterly Data
Previous
New
2015:Q2
9.3
11.2
2015:Q3
11.1
11.0
2015:Q4
11.9
12.0
2016:Q1
13.2
14.8
2016:Q2
N.A.
15.2

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; David Crowe, National Association of Home Builders; Nathaniel Curtis, Navigant Consulting; Gregory Daco, Oxford Economics USA, Inc.; Rajeev Dhawan, Georgia State University; Michael R. Englund, Action Economics, LLC; Michael Gapen, Barclays Capital; James Glassman, JPMorgan Chase & Co.; Matthew Hall, Daniil Manaenkov, and Ben Meiselman, RSQE, University of Michigan; 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, RHB Securities Singapore Pte. Ltd.; L. Douglas Lee, Economics from Washington; John Lonski, Moody’s Capital Markets Group; Macroeconomic Advisers, LLC; R. Anthony Metz, Pareto Optimal Economics; Michael Moran, Daiwa Capital Markets America; Joel L. Naroff, Naroff Economic Advisors; Mark Nielson, Ph.D., MacroEcon Global Advisors; Luca Noto, Anima Sgr; Brendon Ogmundson, BC Real Estate Association; Tom Porcelli, RBC Capital Markets; Arun Raha, Eaton Corporation; Martin A. Regalia, U.S. Chamber of Commerce; Vincent Reinhart, Morgan Stanley; Philip Rothman, East Carolina University; Chris Rupkey, Bank of Tokyo-Mitsubishi UFJ; John Silvia, Wells Fargo; Allen Sinai, Decision Economics, Inc.; Sean M. Snaith, Ph.D., University of Central Florida; Neal Soss, Credit Suisse; Stephen Stanley, Amherst Pierpont Securities; Charles Steindel, Ramapo College of New Jersey; Susan M. Sterne, Economic Analysis Associates, Inc.; Thomas Kevin Swift, American Chemistry Council; 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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Second Quarter 2015 PDF

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The survey for 2015 Q3 will be released on August 14, 2015.

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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