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PHILADELPHIA FED RELEASES THIRD QUARTER 1992 SURVEY OF PROFESSIONAL FORECASTERS

 PHILADELPHIA FED RELEASES THIRD QUARTER 1992 SURVEY
 OF PROFESSIONAL FORECASTERS
 Feeble Recovery Expected to Bring Lower Inflation
 PHILADELPHIA, Aug. 27 /PRNewswire/ -- The economic recovery is going to be significantly weaker than was expected three months ago, according to 36 economic forecasters surveyed by the Federal Reserve Bank of Philadelphia.
 The economy's fast growth in the first three months of 1992 has slowed sharply, and the forecasters have reduced their forecasts for future economic growth, especially for the remainder of 1992. The only benefit of this slower growth is lower inflation than previously forecast. The following chart compares the forecasts of key variables from the previous survey (taken in the second quarter 1992) and the new survey:
 10-yr.
 Real GDP CPI Inflation T-Bond Rate
 Previous New Previous New Previous New
 Quarterly data:
 1992: Q3 3.4 2.1 3.3 3.0 7.5 6.7
 Q4 3.1 2.4 3.5 3.3 7.5 6.8
 1993: Q1 3.0 3.2 3.5 3.2 7.6 6.8
 Q2 3.1 2.3 3.7 3.4 7.7 7.0
 Q3 NA 2.8 NA 3.4 NA 7.1
 Annual average
 data:
 1992 2.0 1.8 3.4 3.1 7.5 7.0
 1993 3.1 2.5 3.6 3.4 7.8 7.0
 This table shows that real GDP growth is expected to be only 2-1/4 percent in the second half of 1992, compared with 3-1/4 percent in the previous survey. Growth is expected to be slower in 1993 as well, growing only 2-1/2 percent for the year, compared with over 3 percent growth in the previous forecast. The table shows a lower expected CPI inflation rate forecast for the next two years. Inflation is expected to remain between 3 and 3-1/2 percent between now and the end of 1993. The lower expected inflation rate translates into lower expected interest rates as well, with the forecast for the 10-year Treasury-bond rate averaging 7 percent in both 1992 and 1993, compared with 7.5 and 7.8 percent in the previous forecast.
 Lower Long-Term Inflation
 The median forecast for the average inflation rate (in the Consumer Price Index) for the next 10 years dropped to 3.75 percent, compared with 3.9 percent in the previous survey. The middle half of the forecasts were in the range of 3.2 to 4.0 percent, though some forecasters think the inflation rate could be as low as 2-1/2 percent over the next 10 years, while others think it could be as high as 6 percent.
 Slower Growth Means Higher Unemployment
 The reduced growth rate of output in the economy translates into higher unemployment. The forecasters see the unemployment rate peaking in the third quarter of 1992 at 7.6 percent (quarterly average), compared with 7.1 percent in the previous forecast. Unemployment is expected to decline slowly, averaging 7.4 percent in 1992 and 7.0 percent in 1993.
 Low, but Increasing, Risk of Another Negative Quarter
 There remains only a slight chance that real GDP growth will be negative in any of the quarters for which the forecasts were made. But that probability is a bit higher than in the previous forecast, as the following table shows:
 Mean Probability of a Decline in Real GDP
 Second Quarter 1992 Survey Third Quarter 1992 Survey
 1992: Q3 11 percent 13 percent
 Q4 11 16
 1993: Q1 11 13
 Q2 12 12
 Q3 NA 11
 The Philadelphia Fed's Survey of Professional Forecasters was formerly conducted by the American Statistical Association (ASA) and the National Bureau of Economic Research (NBER) and was known as the ASA/NBER survey. The survey, which began in 1968, is conducted each quarter. The Federal Reserve Bank of Philadelphia, in cooperation with the NBER, assumed responsibility for the survey in June 1990.
 For further information about the Survey of Professional Forecasters, contact Dean Croushore, Research Officer and Economist, Federal Reserve Bank of Philadelphia, Ten Independence Mall, Philadelphia, Pa., 19106, 215-574-3809.
 SURVEY OF PROFESSIONAL FORECASTERS
 MAJOR MACROECONOMIC INDICATORS, 1992-93
 Forecast Annual
 1992 1993 Average
 Q3 Q4 Q1 Q2 Q3 1992 1993
 Percent Growth at
 Annual Rates
 1. Real GDP (Billions
 of 1987 Dollars) 2.1 2.4 3.2 2.3 2.8 1.8 2.5
 2. GDP Implicit Price
 Deflator
 (1987 equals 100) 2.4 2.8 3.0 2.7 2.6 2.6 3.1
 3. Gross Domestic
 Product (GDP)
 ($ Billions) 4.9 4.8 5.3 5.7 5.6 4.5 5.1
 4. Consumer Price
 Index (CPI-U)
 (Annual Rate) 3.0 3.3 3.2 3.4 3.4 3.1 3.4
 Variables in Levels
 5. Unemployment Rate
 (pct.) 7.6 7.5 7.3 7.1 6.9 7.4 7.0
 6. 3-Month Treasury
 Bill Rate (pct.) 3.2 3.2 3.4 3.6 3.8 3.5 3.7
 7. 10-Year Treasury
 Bond Yield (pct.) 6.7 6.8 6.8 7.0 7.1 7.0 7.0
 Source: Research Department, Federal Reserve Bank of Philadelphia, Survey of Professional Forecasters, Third Quarter 1992.
 Notes:
 The figures on each line are medians of 36 individual forecasts. NA equals Not Applicable.
 For the GDP Implicit Price Deflator and Consumer Price Index, the annual average is the percent change in the fourth quarter index level from the fourth quarter index level of the previous year.
 /delval/
 -0- 8/27/92
 /CONTACT: Dean Croushore, research officer and economist, 215-574-3809, or for logistical information, Rossana Mancini, 215-574-3810, both of the Federal Reserve Bank of Philadelphia CO: Federal Reserve Bank of Philadelphia ST: Pennsylvania IN: FIN SU: ECO


MK-JS -- PH013 -- 3959 08/27/92 12:59 EDT
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