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Fourth Quarter 2012 Survey of Professional Forecasters

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

Forecasters Hold the Line on Their Estimates for Growth

The outlook for the U.S. economy is little changed from the survey of three months ago, according to 39 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The forecasters expect real GDP to grow at an annual rate of 1.8 percent this quarter, down from the previous estimate of 2.2 percent. Over the next three quarters, they expect GDP growth to average 2.1 percent, down from the previous average of 2.2 percent. On an annual-average over annual-average basis, the forecasters see real GDP growing 2.2 percent in 2012, unchanged from their prediction in the survey of three months ago. The forecasters predict real GDP will grow 2.0 percent in 2013, 2.7 percent in 2014, and 2.9 percent in 2015.

The estimates for unemployment also changed little from the projections in the last survey. Unemployment is projected to be an annual average of 8.1 percent in 2012, before falling to 7.8 percent in 2013, 7.4 percent in 2014, and 6.9 percent in 2015. The projections are similar to those of the previous survey.

On the employment front, the forecasters have made small revisions to their estimates of the growth in jobs over the next four quarters. The forecasters see nonfarm payroll employment growing at a rate of 148,700 jobs per month this quarter and 127,400 jobs per month next quarter. The forecasters’ projections for the annual-average level of nonfarm payroll employment are almost identical to those of three months ago. The projections suggest job gains at a monthly rate of 155,600 in 2012 and 143,300 in 2013, as the table below shows. (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
2012:Q4
2.2
1.8
8.1
7.9
135.3
148.7
2013:Q1
1.8
1.7
8.0
7.9
151.7
127.4
2013:Q2
2.3
2.0
7.9
7.8
139.7
146.1
2013:Q3
2.5
2.7
7.8
7.8
149.0
170.2
2013:Q4
N.A.
2.8
N.A.
7.6
N.A.
178.3
Annual data (projections are based on annual-average levels)
2012
2.2
2.2
8.2
8.1
154.6
155.6
2013
2.1
2.0
7.9
7.8
143.2
143.3
2014
2.7
2.7
7.3
7.4
N.A.
N.A.
2015
3.1
2.9
7.0
6.9
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 forecasters have shifted the distributions of density to the right for 2014 and 2015, indicating their expectations of higher real GDP growth compared with their previous estimates.

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. The forecasters have shifted the distributions of density to the left for 2014 and 2015, indicating their expectations of lower unemployment rates over those two years compared with their previous estimates.

Forecasters See Little Reason to Adjust Their Inflation Projections

The forecasters expect current-quarter headline CPI inflation to average 2.3 percent, up from the last survey’s estimate of 2.0 percent. They predict current-quarter headline PCE inflation of 2.0 percent, identical to that in the last survey.

Measured on a fourth-quarter over fourth-quarter basis, headline CPI inflation is expected to average 1.9 percent in 2012, up slightly from 1.8 percent in the last survey. The forecasts for 2.2 percent in 2013 and 2.3 percent in 2014 are the same as they were in the last survey.

Forecasters also expect fourth-quarter over fourth-quarter headline PCE inflation at levels unchanged from the previous survey: 1.7 percent in 2012, 2.0 percent in 2013, and 2.2 percent in 2014.

Revisions to the projections for long-term inflation are also small. Over the next 10 years, 2012 to 2021, the forecasters expect headline CPI inflation to average 2.30 percent at an annual rate. The corresponding estimate for 10-year annual-average headline PCE inflation is 2.10 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
Quarterly
2012:Q4
2.0
2.3
2.0
1.8
2.0
2.0
1.8
1.6
2013:Q1
2.1
2.1
2.0
1.9
2.0
1.8
1.9
1.8
2013:Q2
2.1
2.2
2.0
2.0
2.0
2.0
2.0
1.9
2013:Q3
2.2
2.2
2.1
2.0
2.1
2.0
2.0
1.9
2013:Q4
N.A.
2.3
N.A.
2.0
N.A.
2.1
N.A.
1.9
Q4/Q4 Annual Averages
2012
1.8
1.9
2.2
2.0
1.7
1.7
1.9
1.7
2013
2.2
2.2
2.0
2.0
2.0
2.0
2.0
1.9
2014
2.3
2.3
2.2
2.2
2.2
2.2
2.0
2.0
Long-Term Annual Averages
2012-2016
2.20
2.28
N.A.
N.A.
2.00
2.00
N.A.
N.A.
2012-2021
2.35
2.30
N.A.
N.A.
2.20
2.10
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. The top panel shows the small downward revision for CPI inflation, from 2.35 percent to 2.30 percent. The bottom panel highlights the small downward revision for PCE inflation, from 2.2 percent to 2.1 percent.

The figures below show the probabilities the forecasters are assigning to the possibility that fourth-quarter over fourth-quarter core PCE inflation in 2012 and 2013 will fall into each of 10 ranges. The top panel shows that the spread of density estimates for core PCE inflation in 2012 has tightened with the largest probability assigned to the range of 1.5 percent to 1.9 percent. The estimates of uncertainty about core PCE inflation in 2013 remained mostly unchanged from the previous survey.

Forecasters Cut the Chance for Negative Fourth-Quarter Growth

For the current quarter, the forecasters predict a 13.5 percent chance of negative growth, down from 17.0 percent in the survey of three months ago. The forecasters have little revised the chance of a contraction in real GDP in any of the next three quarters. As the table below shows, the panelists have made only small revisions to their forecasts for the following three quarters.

Risk of a Negative Quarter (%)
Quarterly data
Previous
New
2012: Q4
17.0
13.5
2013: Q1
21.2
23.0
2013: Q2
21.0
21.7
2013: Q3
19.1
17.9
2013: Q4
N.A.
16.4

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); Robert J. Barbera, Mount Lucas Management; Christine Chmura, Ph.D. and Xiaobing Shuai, Ph.D., Chmura Economics & Analytics; Gary Ciminero, CFA, GLC Financial Economics; Julia Coronado, BNP Paribas; 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 and Arun Raha, 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, Anima Sgr; Brendon Ogmundson, BC Real Estate Association; Martin A. Regalia, U.S. Chamber of Commerce; David Resler, Nomura Securities International, Inc.; Philip Rothman, East Carolina University; Chris Rupkey, Bank of Tokyo-Mitsubishi UFJ; 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, Goldman Sachs; Lea Tyler, Oxford Economics USA, Inc.; Jay N. Woodworth, Woodworth Holdings, Ltd.; Richard Yamarone, Bloomberg, LP; Mark Zandi, Moody’s Analytics

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

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Fourth Quarter 2012 PDF

Next Survey Release

The survey for 2012 Q4 will be released on February 15, 2013.

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

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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