Forecasters Maintain Their Expectations for Growth in 2023

The forecasters see the U.S. economy in 2023 expanding at the same pace as they predicted three months ago, according to 38 panelists surveyed by the Federal Reserve Bank of Philadelphia. The forecasters predict annual-average over annual-average growth in real GDP of 1.3 percent in 2023, unrevised from their estimate of three months ago. The panelists are also maintaining their forecast for growth in the second quarter at an annual rate of 1.0 percent, unchanged compared with their previous projection. However, while their predictions for the second quarter and for 2023 remain the same, the forecasters revised upward their predictions for the third quarter of 2023. They also revised downward their fourth-quarter estimates.

A downward revision of 0.1 percentage point in the quarterly projections for the unemployment rate over the next four quarters accompanies the outlook for growth. On an annual-average over annual-average basis, the forecasters have lowered their 2023 unemployment rate forecast from 3.8 percent in the previous survey to 3.7 percent in the current survey.

The forecasters see stronger payroll employment growth in 2023 than they did three months ago. The current estimate calls for job gains at a monthly rate of 257,500 in 2023, marking an increase from 217,800 in the previous survey.

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:
2023:Q2 1.0 1.0 3.7 3.6 0.5 156.1
2023:Q3 -0.1 0.6 3.9 3.8 47.5 43.8
2023:Q4 1.2 -0.0 4.1 4.0 62.7 25.6
2024:Q1 1.3 1.0 4.2 4.1 60.8 37.2
2024:Q2 N.A. 2.5 N.A. 4.2 N.A. 22.7
Annual data (projections are based on annual-average levels):
2023 1.3 1.3 3.8 3.7 217.8 257.5
2024 1.4 1.0 4.2 4.3 43.3 56.1
2025 2.2 2.4 4.2 4.4 N.A. N.A.
2026 1.5 2.3 4.1 4.3 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 current estimates indicate the forecasters are slightly more confident that real GDP growth will fall into the range of 0.0 percent to 1.4 percent in each of the next four years than they were in 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 and previous estimates of the probability that unemployment will fall into each of 10 ranges. The current estimates for 2023 show the forecasters are more confident that annual-average unemployment will be between 3.0 percent and 3.9 percent than they were in the previous survey.

Forecasters Revise Upward Their Near-Term Expectations for Inflation

The forecasters have revised upward their near-term projections for headline and core CPI and PCE inflation, compared with their projections of three months ago. These upward revisions characterize the projections for every inflation measure over nearly all of the next four quarters as well as the whole of 2023.

Over the next 10 years, 2023 to 2032, the forecasters predict headline CPI inflation will be an annual-average rate of 2.36 percent, slightly lower than the previous estimate of 2.37 percent. The corresponding estimate for the 10-year annual-average PCE inflation rate is 2.20 percent, slightly higher than the previous estimate of 2.15 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
2023:Q2 3.4 3.5 3.6 4.5 3.0 3.2 3.1 3.8
2023:Q3 3.1 3.2 3.1 3.6 2.6 3.2 2.7 3.3
2023:Q4 2.8 2.9 2.9 3.1 2.6 2.9 2.5 2.9
2024:Q1 2.6 2.7 2.8 3.0 2.3 2.5 2.5 2.5
2024:Q2 N.A. 2.4 N.A. 2.7 N.A. 2.4 N.A. 2.4
Q4/Q4 Annual Averages
2023 3.1 3.4 3.4 4.1 2.8 3.4 3.0 3.7
2024 2.5 2.5 2.6 2.7 2.2 2.4 2.3 2.3
2025 2.4 2.3 2.4 2.3 2.2 2.1 2.1 2.0
Long-Term Annual Averages
2023-2027 2.50 2.50 N.A. N.A. 2.30 2.42 N.A. N.A.
2023-2032 2.37 2.36 N.A. N.A. 2.15 2.20 N.A. N.A.

The charts below show the median projections (the red line) and the associated interquartile ranges (gray areas around the red line) for 10-year annual-average CPI and PCE inflation. The charts provide perspective on the current survey’s slightly lower 10-year annual-average CPI inflation projection and the slightly higher 10-year annual-average PCE inflation projection.

The figures below show the probabilities that the forecasters are assigning to each of 10 possible ranges for fourth-quarter over fourth-quarter core PCE inflation in 2023 and 2024. The forecasters have increased their estimates for the probability that core PCE inflation in 2023 will be 3.5 percent or higher compared with their prediction in the last survey. For 2024, forecasters’ probabilities for core PCE inflation remain largely unchanged between the current and previous surveys.

Higher Risk of Negative Real GDP Growth in Second Half of 2023 and Early 2024

The forecasters reduced their estimate for the risk of negative growth this quarter but raised their estimates over subsequent quarters. The estimate for the current quarter stands at 38.8 percent, down from the previous estimate of 42.4 percent. The first quarter 2024 estimate saw the largest revision in the risk of a contraction in real GDP. The forecasters now peg that risk at 39.3 percent, marking an upward revision from 31.8 percent in the previous survey of three months ago.

Risk of a Negative Quarter (%)
Survey Means

Quarterly data: Previous New
2023:Q2 42.4 38.8
2023:Q3 44.9 45.2
2023:Q4 40.6 41.9
2024:Q1 31.8 39.3
2024:Q2 N.A. 31.8

Technical Notes

Moody’s Aaa and Baa Historical Rates

The historical values of Moody’s Aaa and Baa rates are proprietary and, therefore, not available in the data files on the Bank’s website or on the tables that accompany the survey’s complete write-up in the PDF.

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

Scott Anderson, Bank of the West (BNP Paribas Group); Anwiti Bahuguna and Ed Al-Hussainy, Columbia Threadneedle Investments; Robert J. Barbera, Johns Hopkins University Center for Financial Economics; Peter Bernstein, RCF Economic and Financial Consulting, Inc.; Wayne Best and Michael Brown, Visa, Inc.; Jay Bryson, Wells Fargo; Christine Chmura, Ph.D., and Xiaobing Shuai, Ph.D., Chmura Economics & Analytics; Gary Ciminero, CFA, GLC Financial Economics; Grant Collins, AIM Research, LLC; Rajeev Dhawan, Georgia State University; Bill Diviney, ABN AMRO Bank NV; Gabriel Ehrlich, Daniil Manaenkov, and Tereza Ranosova, RSQE, University of Michigan; Michael R. Englund, Action Economics, LLC; Sacha Gelfer, Bentley University; James Glassman, JPMorgan Chase & Co.; Jan Hatzius, Goldman Sachs; Steve Kihm, Citizens Utility Board of Wisconsin; Oren Klachkin and Ryan Sweet, Oxford Economics USA, Inc.; Jack Kleinhenz, Kleinhenz & Associates, Inc.; Yaniv Konchitchki, University of California, Berkeley; Thomas Lam, Sim Kee Boon Institute, Singapore Management University; Brian Martin, Australia New Zealand Bank (ANZ); Robert McNab, Old Dominion University; R. Anthony Metz, Pareto Optimal Economics; R. M. Monaco, TitanRM; Joel L. Naroff, Naroff Economic Advisors; Nomura Securities International; Brendon Ogmundson, BC Real Estate Association; Perc Pineda, Ph.D., Plastics Industry Association; Joel Prakken and Chris Varvares, S&P Global Market Intelligence; Jason Prole, Capital Risk Management; Michael Roberts, Roberts Capital Advisors, LLC; Alfredo A. Romero, North Carolina A&T State University; Philip Rothman, East Carolina University; Allen Sinai and Lu Yu, Decision Economics, Inc.; Sean Snaith, University of Central Florida; Stephen Stanley, Santander Capital Markets; Charles Steindel, Editor, NABE Business Economics; Susan M. Sterne, Economic Analysis Associates, Inc.; Edward Sullivan, Portland Cement Association; James Sweeney, Credit Suisse; Jordan Vickers and Marie Dempsey, Eaton Corporation; Lawrence Werther, Daiwa Capital Markets America; 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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