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Forecasters See Slightly Brighter Outlook for Growth and Labor Markets in 2018 and 2019
The U.S. economy looks slightly stronger now than it did three months ago, according to 36 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The forecasters predict real GDP will grow at an annual rate of 3.0 percent this quarter and next quarter, up slightly from the estimates of three months ago. On an annual-average over annual-average basis, the forecasters predict real GDP growing 2.8 percent in 2018, 2.7 percent in 2019, 1.9 percent in 2020, and 2.0 percent in 2021.
The forecasters see a marginally brighter outlook for the unemployment rate. The forecasters predict the unemployment rate will average 3.9 percent in 2018, 3.7 percent in 2019, 3.9 percent in 2020, and 4.0 percent in 2021. The projections for 2018 and 2019 are slightly below those of the last survey, indicating a better outlook for unemployment.
The panelists also predict an improvement in employment for 2018 and 2019. The projections for the annual-average level of nonfarm payroll employment suggest job gains at a monthly rate of 185,900 in 2018, up from the previous estimate of 175,100, and 160,800 in 2019, up from 150,300 estimated three months ago. (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.)
Higher Inflation in 2018
The forecasters expect current-year headline CPI inflation to average 2.5 percent, up from 2.1 percent in the last survey. Headline PCE inflation for 2018 will be 2.1 percent, up 0.2 percentage point from the previous estimate.
However, the forecasters’ projections for inflation beyond 2018 are mostly unchanged compared with the previous survey. Headline CPI inflation is expected to average 2.2 percent in 2019 and 2.3 percent in 2020, unchanged from the last survey. The forecasters have revised slightly their projections for headline PCE inflation in 2019 and 2020 to 2.1 percent, from 2.0 percent previously.
Over the next 10 years, 2018 to 2027, the forecasters expect headline CPI inflation to average 2.30 percent at an annual rate, up marginally from the previous estimate of 2.25 percent. The corresponding estimate for 10-year annual-average PCE inflation is 2.00 percent, unchanged from the estimate of three months ago.
Low Risk of a Negative Quarter
The forecasters have revised downward the chance of a contraction in real GDP in any of the next four quarters. For the current quarter, the forecasters predict a 5.3 percent chance of negative growth, down from 9.1 percent in the survey of three months ago. The panelists have also made downward revisions to their probability estimates for the next three quarters.
Posted: May 11, 2018 Friday 10:00 AM