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Fourth Quarter 2015 Survey of Professional Forecasters

Forecasters Shave Their Growth Estimates for 2016 and 2017

Growth in real GDP in 2016 and 2017 looks a little slower now than it did three months ago, according to 45 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The forecasters currently see growth in the annual-average level of real GDP at 2.6 percent in 2016 and 2.5 percent in 2017. These current estimates represent downward revisions to the outlook of three months ago, when the forecasters thought 2016 growth would be 2.8 percent and 2017 growth would be 2.6 percent. Notably, the forecasters have raised their growth estimates for 2018. They now see real GDP growing 2.8 percent in 2018, up from the previous estimate of 2.4 percent.

A slightly improved outlook for the unemployment rate accompanies the outlook for growth. The forecasters predict the unemployment rate will be an annual average of 5.3 percent in 2015, before falling to 4.8 percent in 2016, 4.7 percent in 2017, and 4.7 percent in 2018. The projections for 2016 and 2017 are below those of the last survey.

On the jobs front, the panelists have revised upward their estimates for job gains in the first three quarters of 2016. The forecasters see nonfarm payroll employment growing at a rate of 201,500 jobs per month this quarter and 188,200 jobs per month next quarter. The forecasters’ projections for the annual-average level of nonfarm payroll employment suggest job gains at a monthly rate of 241,800 in 2015 and 197,000 in 2016. (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:Q4
2.8
2.6
5.1
5.0
220.4
201.5
2016:Q1
2.8
2.5
5.1
4.9
185.1
188.2
2016:Q2
2.8
2.6
5.0
4.8
191.3
193.5
2016:Q3
2.7
2.9
4.9
4.8
189.5
192.0
2016:Q4
N.A.
2.4
N.A.
4.7
N.A.
181.2
 
Annual data (projections are based on annual-average levels):
2015
2.3
2.4
5.3
5.3
244.2
241.8
2016
2.8
2.6
5.0
4.8
200.5
197.0
2017
2.6
2.5
4.8
4.7
N.A.
N.A.
2018
2.4
2.8
4.7
4.7
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 that the estimates of uncertainty about growth in 2016, 2017, and 2018 are similar to those of the previous survey.

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 forecasters have revised upward their estimates of the probability that the annual-average unemployment rate will fall below 5.0 percent in 2016, 2017, and 2018.

Forecasters See Lower Inflation over the Next Four Quarters

The forecasters have revised downward their projections for the headline and core measures of CPI and PCE inflation over the next four quarters.

The forecasters expect current-quarter headline CPI inflation to average 0.9 percent, lower than the last survey’s estimate of 1.8 percent. Similarly, the forecasters predict current-quarter headline PCE inflation of 0.9 percent, lower than the prediction of 1.4 percent in the survey of three months ago.

The forecasters also see lower core PCE inflation in 2016 and 2017 than they predicted three months ago. Measured on a fourth-quarter over fourth-quarter basis, core PCE inflation is expected to average 1.6 percent in 2016, down from 1.8 percent in the last survey, and 1.8 percent in 2017, down 0.1 percentage point from the previous estimate.

Over the next 10 years from 2015 to 2024, the forecasters expect headline CPI inflation to average 2.15 percent at an annual rate, unchanged from the survey of three months ago. The corresponding estimate for 10-year annual-average PCE inflation is 1.90 percent, down 0.1 percentage point from the previous survey.

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:Q4
1.8
0.9
1.9
1.8
1.4
0.9
1.6
1.5
2016:Q1
2.0
1.8
2.0
1.9
1.7
1.6
1.7
1.5
2016:Q2
2.2
2.1
2.0
2.0
1.9
1.8
1.8
1.6
2016:Q3
2.2
2.1
2.1
2.0
1.9
1.8
1.8
1.7
2016:Q4
N.A.
2.2
N.A.
2.0
N.A.
1.9
N.A.
1.7
 
Q4/Q4 Annual Averages
2015
0.8
0.6
2.0
1.9
0.8
0.6
1.5
1.4
2016
2.1
2.0
2.0
2.0
1.8
1.8
1.8
1.6
2017
2.3
2.3
2.1
2.1
1.9
1.9
1.9
1.8
 
Long-Term Annual Averages
2015-2019
2.00
1.90
N.A.
N.A.
1.80
1.65
N.A.
N.A.
2015-2024
2.15
2.15
N.A.
N.A.
2.00
1.90
N.A.
N.A.

The charts below show the median projections (the red lines) and the associated interquartile ranges (the gray areas around the red lines) for the projections for 10-year annual-average CPI and PCE inflation. The top panel shows the unchanged estimate for 10-year CPI inflation, at 2.15 percent. The bottom panel shows a slightly lower 10-year forecast for PCE inflation, at 1.90 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 2015 and 2016, the forecasters have increased the probability that core PCE inflation will fall in the lower levels of inflation outcomes.

Small Risk of a Negative Quarter

The forecasters see only a small chance of a contraction in real GDP in any of the next five quarters. For the current quarter, they predict a 7.7 percent chance of negative growth, down from 10.0 percent in the previous survey.

Risk of a Negative Quarter (%)
Survey Means
Quarterly data: Previous New
2015:Q4
10.0
7.7
2016:Q1
13.7
13.0
2016:Q2
13.0
12.6
2016:Q3
13.6
13.7
2016:Q4
N.A.
14.7

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; Larry Filer, Old Dominion University; 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 Research USA; 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 and Maira Trimble, Eaton Corporation; 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.; Sean M. Snaith, Ph.D., University of Central Florida; Constantine G. Soras, Ph.D., CGS Economic Consulting; 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; Ellen Zentner, Morgan Stanley.

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

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Fourth Quarter 2015 PDF

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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