skip navigation

Friday, October 31, 2014

[ – ] Text Size [ + ]  |  Print Page

Third Quarter 2011 Survey of Professional Forecasters

Listen to an interview with a research analyst about this quarter's survey. Audio Interview

Forecasters Predict Slower Growth

Growth in the U.S. economy is predicted to be slower in the short run compared to the forecast of three months ago, according to 37 panelists surveyed by the Federal Reserve Bank of Philadelphia. Our panelists expect real GDP to grow at an annual rate of 2.2 percent this quarter, down from the previous estimate of 3.4 percent. On an annual-average over annual-average basis, the forecasters have also revised downward their forecasts of real GDP growth. The forecasters see real GDP growing 1.7 percent in 2011, down from their prediction of 2.7 percent in the last survey. The forecasters predict real GDP will grow 2.6 percent in 2012, 2.9 percent in 2013, and 3.1 percent in 2014.

The outlook for the labor market has deteriorated. Unemployment is projected to stand at an annual average rate of 9.0 percent in 2011, 8.6 percent in 2012, 8.1 percent in 2013, and 7.6 percent in 2014; each is higher than the forecasts from the last survey. On the jobs front, the forecasters see slower growth in jobs in 2011 and 2012 than they predicted in the last survey. The forecasters see nonfarm payroll employment growing at a rate of 105,300 jobs per month this quarter and 148,700 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 111,500 in 2011 and 150,100 in 2012, as shown in the table below. (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.)

 
Real GDP (%)
Unemployment
Rate (%)
Payrolls
(000s/month)
 
Previous
New
Previous
New
Previous
New
Quarterly data:
2011:Q3
3.4
2.2
8.7
9.1
194.5
105.3
2011:Q4
3.5
2.6
8.5
9.0
173.9
148.7
2012:Q1
2.9
2.2
8.4
8.8
219.4
180.3
2012:Q2
2.5
2.9
8.2
8.7
182.0
138.0
2012:Q3
N.A.
3.2
N.A.
8.6
N.A.
187.0
Annual data (projections are based on annual-average levels):
2011
2.7
1.7
8.7
9.0
130.4
111.5
2012
3.0
2.6
8.1
8.6
194.8
150.1
2013
2.8
2.9
7.5
8.1
N.A.
N.A.
2014
3.3
3.1
7.0
7.6
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. In general the forecasters see an increased probability of lower real GDP growth.

The forecasters’ density projections, as shown in the charts below, shed light on the odds of a recovery in the labor market over the next four years. Each chart presents the forecasters’ previous and current estimates of the probability that unemployment will fall into each of 10 ranges. Overall, the forecasters see an increase in the probability of higher unemployment rates.

Downward Revisions to the Outlook for Headline Inflation

The forecasters predict lower headline inflation in the current quarter and slightly lower headline inflation over the next five years. The forecasters expect current-quarter headline CPI inflation to average 1.5 percent, down from the last survey’s estimate of 2.2 percent. The forecasters predict a lower current-quarter headline PCE inflation of 1.5 percent, down from the last survey’s estimate of 2.2 percent.

Measured on a fourth-quarter over fourth-quarter basis, headline CPI inflation is expected to average 3.2 percent in 2011, 2.0 percent in 2012, and 2.1 percent in 2013, compared to the forecasts of 3.1 percent, 2.2 percent, and 2.3 percent, respectively, in the last survey.

Over the next 10 years, 2011 to 2020, the forecasters expect headline CPI inflation to average 2.4 percent at an annual rate. This estimate is the same as in the last survey.

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
2011:Q3
2.2
1.5
1.6
2.1
2.2
1.5
1.4
1.7
2011:Q4
2.0
2.0
1.6
1.7
1.8
1.7
1.5
1.5
2012:Q1
2.3
2.0
1.9
1.6
1.7
1.8
1.6
1.5
2012:Q2
2.1
2.1
1.9
1.9
1.8
1.6
1.6
1.7
2012:Q3
N.A.
2.0
N.A.
2.0
N.A.
1.8
N.A.
1.7
Q4/Q4 Annual Averages
2011
3.1
3.2
1.6
2.0
2.6
2.5
1.5
1.7
2012
2.2
2.0
1.9
1.8
1.9
1.8
1.6
1.6
2013
2.3
2.1
2.0
1.8
2.1
2.0
1.8
1.7
Long-Term Annual Averages
2011-2015
2.35
2.30
N.A.
N.A.
2.20
2.10
N.A.
N.A.
2011-2020
2.40
2.40
N.A.
N.A.
2.27
2.25
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. Both median projections have held steady in the current survey.

The figures below show the probabilities that the forecasters are assigning to the possibility that fourth-quarter over fourth-quarter core PCE inflation in 2011 and 2012 will fall into each of 10 ranges. The forecasters have assigned a slightly greater probability to higher inflation for both years.

Increased Risk of Negative Growth

The forecasters see an increased probability of a contraction in real GDP over the next four quarters. For the current quarter, they predict a 17.2 percent chance of negative growth, which is higher than the estimate in the survey of three months ago.

Risk of a Negative Quarter (%)
 
Previous
New
Quarterly data:
2011: Q3
8.5
17.2
2011: Q4
10.2
20.9
2012: Q1
12.2
20.8
2012: Q2
12.1
19.4
2012: Q3
N.A.
19.0

Natural Rate of Unemployment Estimated at 6.00 percent

In third-quarter surveys we ask the forecasters to provide their estimates of the natural rate of unemployment — the rate of unemployment that occurs when the economy reaches equilibrium. The forecasters peg this rate at 6.00 percent, the highest rate over the last 15 years. The table below shows, for each third-quarter survey since 1996, the percentage of respondents who use the natural rate in their forecasts, and for those who use it, the median estimate and the lowest and highest estimates. Forty-one percent of the 37 forecasters who answered the question report that they use the natural rate in their forecasts. The lowest estimate is 4.75 percent and the highest estimate is 7.00 percent.

Median Estimates of the Natural Rate of Unemployment
Survey Date
Percentage Who Use The Natural Rate
Median Estimate (%)
Low (%)
High (%)
1996:Q3
62
5.65
5.00
6.00
1997:Q3
59
5.25
4.50
5.88
1998:Q3
47
5.30
4.50
5.80
1999:Q3
43
5.00
4.13
5.60
2000:Q3
48
4.50
4.00
5.00
2001:Q3
34
4.88
3.50
5.50
2002:Q3
50
5.10
3.80
5.50
2003:Q3
41
5.00
4.31
5.40
2004:Q3
46
5.00
4.00
5.50
2005:Q3
51
5.00
4.25
5.50
2006:Q3
53
4.95
4.00
5.50
2007:Q3
52
4.65
4.20
5.50
2008:Q3
48
5.00
4.00
5.50
2009:Q3
61
5.00
4.00
6.00
2010:Q3
64
5.78
4.50
6.80
2011:Q3
41
6.00
4.75
7.00

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

Robert J. Barbera, Mount Lucas Management; 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; Rajeev Dhawan, Georgia State University; Shawn Dubravac, Consumer Electronics Association; Michael R. Englund, Action Economics, LLC; Stephen Gallagher, Societe Generale; Timothy Gill, NEMA; James Glassman, JPMorgan Chase & Co.; Ethan Harris, Bank of America-Merrill Lynch; Keith Hembre, Nuveen Asset Management; Peter Hooper, Deutsche Bank Securities, Inc.; IHS Global Insight; Peter Jaquette, PIRA Energy Group; Fred Joutz, Benchmark Forecasts and Research Program on Forecasting, George Washington University; Kurt Karl, Swiss Re; N. Karp, BBVA Compass; Walter Kemmsies, Moffatt & Nichol; Jack Kleinhenz, Kleinhenz & Associates, Inc.; Thomas Lam, OSK Group/DMG & Partners; L. Douglas Lee, Economics from Washington; Allan R. Leslie, Economic Consultant; John Lonski, Moody’s Capital Markets Group; Macroeconomic Advisers, LLC; Dean Maki, Barclays Capital; Jim Meil, Eaton Corporation; Anthony Metz, Pareto Optimal Economics; Ardavan Mobasheri, AIG Global Economic Research; Michael Moran, Daiwa Capital Markets America; Joel L. Naroff, Naroff Economic Advisors; Mark Nielson, Ph.D., MacroEcon Global Advisors; Michael P. Niemira, International Council of Shopping Centers; Luca Noto, Prima Sgr; Martin A. Regalia, U.S. Chamber of Commerce; David Resler, Nomura Securities International, Inc.; Philip Rothman, East Carolina University; John Silvia, Wells Fargo; Allen Sinai, Decision Economics, Inc; Tara M. Sinclair, Research Program on Forecasting, George Washington University; David Sloan, Thomson Reuters; Sean M. Snaith, Ph.D., University of Central Florida; Constantine G. Soras, Ph.D., CGS Economic Consulting; Neal Soss, Credit Suisse; Stephen Stanley, Pierpont Securities; Charles Steindel, New Jersey Department of the Treasury; Susan M. Sterne, Economic Analysis Associates, Inc.; Thomas Kevin Swift, American Chemistry Council; Andrew Tilton and Edward F. McKelvey, Goldman Sachs; Lea Tyler, Oxford Economics USA, Inc.; Jay N. Woodworth, Woodworth Holdings, Ltd.; Mark Zandi, Moody’s Analytics

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

Special Notice to Users of the Data from the Survey of Professional Forecasters

On August 12, 2011, the Philadelphia Fed released the results of the Survey of Professional Forecasters for the third quarter of 2011. At the same time, we also released some changes to the individual responses of the survey's historical data set.

All together, we corrected 182 individual observations, spread across all survey variables, forecast horizons, and survey dates. This is a small number of changes compared with the number of responses in the entire data set. We focused our attention on individual responses that were more than five standard deviations from the mean response. In some cases, we were able to change the recorded response to the correct value. In other cases, we changed the observation in question to a missing value.

We exercise great caution in changing observations. In particular, we never change an observation unless we are certain that it is incorrect. In some cases, we maintained the value of an extreme observation because we were unable to determine that it was, in fact, a mistake. Additional work along these lines is planned for the future.

All mean and median survey responses, as well as measures of cross-section dispersion, have been recomputed to reflect the adjustments made to the individual survey responses. In all cases, there was little change to the median responses.

A list of the changes made is available in PDF format. PDF (324 KB, 37 pages)

Special thanks go to the Real-Time Data Research Center's John Chew for his assistance on this project. All inquiries should be directed to:

Tom Stark
Assistant Director and Manager
Real-Time Data Research Center
Research Department
Federal Reserve Bank of Philadelphia
215-574-6436
Tom.Stark@phil.frb.org E-mail

Return to the main page for the Survey of Professional Forecasters.

View Complete WRiteup

A complete writeup of this survey, including all tables, is available in PDF format.

Third Quarter 2011 PDF

Next Survey Release

The survey for 2011 Q4 will be released on November 14, 2011, at 10:00 a.m.

For more up-to-date information, please view the SPF release schedule.

E-Mail Notification

Subscribe to the survey through our e-mail notification system.

Sign Up

Contact Us

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