PHILADELPHIA - Analysts expect growth over the next four quarters to be "slightly stronger now" compared to their view three months ago, while the unemployment outlook is also "brighter," a survey of professional forecasters by the Philadelphia Federal Reserve Bank showed Friday.
The regional Fed bank's second quarter Survey of Professional Forecasters predicts the real annual growth rate will be 3.1% this quarter, improved from the 2.3% they expected in the first quarter survey. However, weak first quarter GDP growth pulled down the growth forecast for the year to 2.1% from 2.3% previously.
The current projection for growth in the third quarter of 2017 is 2.5%, 0.1 percentage point higher than the previous survey three months ago, the bank said, while the forecast for the fourth quarter was unchanged at 2.4%.
The Philadelphia Fed Bank survey is conducted quarterly and includes responses from 37 economists from industry, government, banking and academia.
The panelists predicted the unemployment rate will decline even further than estimated in the first quarter survey, reaching 4.5% in the second quarter, compared to the previous forecast of 4.6%, and 4.4% by the end of the year, down 0.1 percentage point from earlier.
It will continue to fall in 2018 reaching 4.3% on average, before rebounding to 4.4% in 2019 and 4.5% in 2020, the survey shows.
The forecasters expect average payroll growth to be 177,300 in the second quarter, up roughly 10,000 from the previous survey, and to slow to a monthly pace of 170,700 in the third quarter and 165,200 in the fourth. They see average new payrolls at 182,600 for this year and 162,800 in 2018.
The forecasters revised downward their projections for headline inflation over the rest of 2017, pegging headline consumer price index inflation at 1.6% this quarter, down from 2.3% in the previous survey, and at 2.3% by year-end, down from 2.5%. For inflation as measured by the personal consumption expenditures price index, they expect headline to be 1.2% this quarter, down from 2.0% in the previous survey, and headline PCE at 1.9% at the end of the year, same as previously.
Core CPI will rise at a 1.9% pace in the second quarter and accelerate to 2.2% by year-end, while core PCE inflation will be 1.7% this quarter and 1.9% by the end of the year, the forecasters said.
As for longer term growth, forecasters predict PCE will grow 2.09% annually over the next 10 years.
The forecasters said they were more certain core PCE inflation will be between 1.5% to 1.9% this year and next, and fewer predicted that growth could turn negative over the next year.
