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THIRD QUARTER 1993 SURVEY OF PROFESSIONAL FORECASTERS: FORECASTERS SEE WEAKER GROWTH, IMPROVED INFLATION OUTLOOK OVER THE NEAR TERM

 PHILADELPHIA, Aug. 30 /PRNewswire/ -- Current prospects for economic growth through 1993 and into 1994 are weaker now than they were just three months ago, according to 35 forecasters surveyed by the Federal Reserve Bank of Philadelphia.
 After lower than expected growth in the second quarter, the forecasters have reduced their projections for real GDP growth to 2.4 percent in 1993, down 0.6 percentage points from the second-quarter survey. In 1994, the economy is expected to expand at a 2.8 percent rate, down from 3 percent in the last survey. Despite the weaker GDP outlook, the forecasters continue to see the civilian unemployment rate decreasing gradually, averaging 6.9 percent in 1993 and 6.6 percent in 1994, virtually unchanged from three months ago.
 Inflation, as measured by the CPI, is expected to average 3.1 percent in 1993 and 3.2 percent in 1994, both lower than the 3.4 percent forecast in the previous survey. Over the next five quarters, the forecasters see inflation reaching 3.3 percent in the fourth quarter of this year and leveling off at a rate through the third quarter of 1994.
 Weaker growth and lower inflation over 1993 and 1994 will be accompanied by lower interest rates, particularly long-term rates according to the forecasters. The median forecast currently calls for the 10-year Treasury-bond rate to average 6 percent in 1993 and to hold steady at that level in 1994, down from 6.2 percent and 6.3 percent, respectively, in the last survey.
 The following table compares median forcasts for selected variables from the current survey with those from three months ago:
 10-yr.
 Real GDP CPI Inflation T-Bond Yield
 Previous New Previous New Previous New
 Quarterly data:
 1993: Q3 3.3 3.1 3.2 2.7 6.1 5.8
 Q4 3.3 3.2 3.3 3.3 6.2 5.8
 1994: Q1 3.1 2.7 3.5 3.3 6.3 6.0
 Q2 2.6 2.9 3.5 3.3 6.3 6.0
 Q3 NA 3.0 NA 3.3 NA 6.0
 Annual average
 data:
 1993 3.0 2.4 3.4 3.1 6.2 6.0
 1994 3.0 2.8 3.4 3.2 6.3 6.0
 Forecasters Also See Lower Long-Term Inflation
 The median forecast for the average inflation rate (based on the Consumer Price Index) for the next 10 years dropped to 3.45 percent, from 3.7 percent in the last survey. The middle half of the forecasts are in the range of 3.0 to 3.5 percent.
 Slightly Higher Risk of a Negative Quarter
 Forecasters continue to see only a slight chance of a decline in real GDP in the short-term period. However, those probabilities are a bit higher than in the previous forecast, as the following table shows:
 Mean Probability of a Decline in Real GDP
 Second Quarter 1993 Survey Third Quarter 1993 Survey
 1993: Q3 7.0 7.0
 Q4 9.0 10.0
 1994: Q1 12.0 14.0
 Q2 14.0 16.0
 Q3 NA 15.0
 Impact of Midwest Flooding Expected to Be Small
 The forecasters see Midwest weather conditions having only a limited effect on output and inflation over the next two years, with most of the impact concentrated in the remainder of 1993. Of those who expect an effect, most report adjusting their CPI inflation forecast upward by 0.1 to 0.2 percentage points for 1993, while adjusting downward their forecasts for real GDP growth in 1993 by about the same amount.
 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, 1993-94
 Forecast Annual
 1993 1994 Average
 Q3 Q4 Q1 Q2 Q3 1993 1994
 Percent Growth at
 Annual Rates
 1. Real GDP (Billions
 of 1987 Dollars) 3.1 3.2 2.7 2.9 3.0 2.4 2.8
 2. GDP Implicit Price
 Deflator
 (1987 equals 100) 2.6 2.9 3.2 3.2 2.9 2.9 NA
 3. Gross Domestic
 Product (GDP)
 ($ Billions) 6.1 5.9 6.1 5.5 6.0 5.2 5.8
 4. Consumer Price
 Index (CPI-U)
 (Annual Rate) 2.7 3.3 3.3 3.3 3.3 3.1 3.2
 Variables in Levels
 5. Unemployment Rate
 (pct.) 6.9 6.8 6.7 6.6 6.5 6.9 6.6
 6. 3-Month Treasury
 Bill Rate (pct.) 3.0 3.1 3.3 3.3 3.5 3.0 3.4
 7. 10-Year Treasury
 Bond Yield (pct.) 5.8 5.8 6.0 6.0 6.0 6.0 6.0
 Source: Research Department, Federal Reserve Bank of Philadelphia, Survey of Professional Forecasters, Third Quarter 1993.
 Notes:
 The figures on each line are medians of 35 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- 8/30/93
 /CONTACT: Dean Croushore, research officer and economist of the Federal Reserve Bank of Philadelphia, 215-574-3809/


CO: Federal Reserve Bank of Philadelphia ST: Pennsylvania IN: FIN SU: ECO

JM-CC -- PH010 -- 7102 08/30/93 12:59 EDT
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