WASHINGTON (MNI) – The following are excerpts from the Philadelphia Fed’s
December Livingston survey:

Forecasters Predict Lower Economic Growth and Modest Labor Recovery The 32
participants in the December Livingston Survey see sustained output growth
through the end of 2013. The forecasters, who are surveyed by the Federal
Reserve Bank of Philadelphia twice a year, project that the economy’s output
(real GDP) will rise at an annual rate of 1.8 percent during the second half of
2012. They see the growth rate of economic output increasing to 2.1 percent
(annual rate) in the first half of 2013, and they predict that it will then
further increase to 2.3 percent (annual rate) in the second half of 2013. The
current projection for growth in the second half of 2012 was lowered 0.8
percentage point from the survey of six months ago, while the forecast for the
first half of 2013 was lowered 0.2 percentage point.

The panelists expect a modest recovery in the labor market, with the
unemployment rate at 7.9 percent in December 2012 and at 7.8 percent in June
2013. The current projection for December 2012 is down 0.1 percentage point from
the last survey, while the projection for June 2013 is unchanged from the last
survey. The unemployment rate is then expected to fall to 7.7 percent in
December 2013.

Forecasters See CPI Inflation Holding Steady The forecasters’ projections
for CPI inflation over the next two years are holding steady at 2.1 percent. On
an annual-average over annual-average basis, CPI inflation is expected to be 2.1
percent in 2012, 2013, and 2014. PPI inflation is expected to rise to 2.4
percent in 2013 (from a projection of 2.1 percent in 2012), but hold steady at
that rate in 2014.

Short-Term Interest Rates Are Seen Holding Steady Through 2013 The
forecasters see the rate on three-month Treasury bills holding steady at roughly
0.10 percentage point through the end of 2013 before rising to 0.20 percentage
point by December 2014. Previously, the forecasters thought short-term rates
would rise to 0.20 percentage point by December 2013. The forecasters continue
to see the rate on 10-year Treasury bonds rising over time, but now they see the
rate at lower levels than they did six months ago. Previously, they thought
10-year Treasuries would yield 2.75 percent in December 2013. They now see
Treasuries yielding 2.75 percent a full year later, in December 2014.

Long-Term Growth Outlook Revised Downward The panelists project slightly
lower long-term output growth and an unchanged long-term inflation rate. The
forecasters now predict that real GDP will grow 2.5 percent annually over the
next 10 years, slightly lower than the forecast of 2.7 percent in the survey of
six months ago. Inflation (measured by the consumer price index) is expected to
average 2.5 percent over the next 10 years, the same estimate as in the previous
survey.

–MNI Washington Bureau; tel: +1 202-371-2121; email: besene@mni-news.com

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