Forecasters: Weaker Growth Outlook, Lower Unemployment

The outlook for U.S. economic growth over the next three years looks slightly weaker than it did three months ago, the Federal Reserve Bank of Philadelphia’s Survey of Professional Forecasters reported.

The Federal Reserve Bank of Philadelphia surveyed 39 economic forecasters for its quarterly report. The panel said it expects real GDP will grow at a 2.6 percent annual rate this quarter and 2.3 percent next quarter.
On an annual-average over annual-average basis, the forecasters said they expect real GDP will grow 2.1 percent in 2017, unchanged from the previous survey in May. They predicted real GDP will grow 2.4 percent next year, 2.2 percent in 2019 and 2.0 percent in 2020.

“All of the projections for unemployment were revised slightly downward in comparison with the May 2017 survey,” the Survey of Professional Forecasters report said. The panel predicted the unemployment rate will remain at a 4.4 percent annual average in 2017 before falling to 4.2 percent in 2018 and increasing slightly to 4.3 percent for 2019.

“On the employment front, the forecasters have revised downward their estimates for job gains in 2017 but increased their estimates for job gains in 2018,” the report said. The forecasters projected the annual-average level of nonfarm payroll employment would fall slightly to a monthly rate of 180,400 this year, down from the previous 182,600 estimate.

The forecasters surveyed are more certain now than they were last quarter that real GDP growth will fall between 2.0 percent and 2.9 percent this year. For 2018, 2019 and 2020, the probabilities are slightly higher now than they were three months ago for real GDP growth between 2.0 percent and 2.9 percent, the report said.

Measured on a fourth-quarter over fourth-quarter basis, the inflation outlook weakened for both Consumer Price Index inflation and Personal Consumption Expenditure inflation. The forecasters said they expect headline CPI inflation to average 1.7 percent this year, 2.2 percent in 2018 and 2.3 percent in 2019. Their projections for headline PCE inflation equaled 1.5 percent in 2017, 1.9 percent for 2018 and 2.0 percent for 2019.

“The forecasters see only a small chance of a contraction in real GDP in any of the next five quarters,” the report said, noting that forecasters predicted a 6.7 percent chance of negative growth, down from 10.9 percent when surveyed three months ago. “The forecasters see a lower probability of a negative quarter in 2017 and 2018 than they estimated three months ago.”