–Expect Q4 Real GDP to Grow by 1.8% vs Previous Estimate of +2.2%
–Q4 Nonfarm Payrolls Forecast To Grow 148.7k/Month Vs 135.3k Prev Est
–Panelists Trim Unemployment Forecasts For 2013, 2014, 2015

By Brai Odion-Esene

WASHINGTON (MNI) – A Philadelphia Federal Reserve Bank survey
Friday shows while the overall outlook for the U.S. economy might be
unchanged, forecasters lowered their projection for fourth quarter
growth and have higher expectations for the pace at which employers will
add new jobs.

Meanwhile projections for the unemployment rate from Q4 to the
second quarter of 2013 were trimmed slightly, according to the
Philadelphia Fed’s fourth quarter survey of 39 professional forecasters.

The economists’ outlook for the labor market has improved,
predicting a slightly faster pace of decline in the unemployment rate
between this year and 2015 compared to the previous survey.

The outlook for growth in the U.S. economy “was little changed”
from the third quarter survey, the Philadelphia Fed said in its summary
of the survey results.

“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,” it said.

The report said forecasters expect real GDP to grow at an annual
rate of 1.8% this quarter, down from the previous estimate of 2.2%. Over
the next three quarters, they expect GDP growth to average 2.1%, down
from the previous average of 2.2%.

The forecasters predict real GDP will grow 2.0% in 2013 compared to
the previous forecast of 2.1%, by 2.7% in 2014 — unchanged from the
last survey, and 2.9% in 2015, down from the previous expectations.

For the current quarter, the Philadelphia Fed said forecasters
predict a 13.5% chance of negative growth vs. 17.0% in the survey of
three months ago.

However, and perhaps influenced by the looming fiscal cliff and its
predicted impact on growth in the first half of next year, predictions
for GDP contraction in Q1 2013 were raised to 23.0% from 21.2%, while Q2
saw the chance of contraction upped to 21.7% from 21.0%.

With regard to the employment picture, the panelists expect the
unemployment rate to average 7.9% in Q4, a downward revision from 8.1%
in the third quarter survey. The 7.9% forecast for Q1 2013 and 7.8% for
Q2 are little changed from the previous projections.

The survey said the unemployment is projected to be an annual
average of 8.1% in 2012, before falling to 7.8% in 2013, 7.4% in 2014,
and 6.9% in 2015. These outlooks are similar to those of the previous
survey.

Forecasters are expecting a pickup in the pace at which jobs are
added going forward compared to the last survey, with the exception of
Q1 2013 — again likely due to the fiscal cliff.

Still, it should be noted that their forecasts remain nowhere near
the at least 200,000 jobs-per-month pace that most agree is needed to
get the economic recovery going at full speed.

They see nonfarm payroll employment growing at a rate of 148,700
jobs per month this quarter (compared to 135,300 estimated in the last
survey), but then the pace drops off to 127,400 jobs per month next
quarter — compared to the Q3 estimate of 151,700.

The forecasters’ projections for the annual-average level of
nonfarm payroll employment suggest job gains at a monthly rate
of 155,600 in 2012 and 143,300 in 2013.

On the inflation front, the Philadelphia Fed said the forecasters
see little reason to adjust their projections, although estimates for
headline consumer prices indicate forecasters expect a small rise in
near-term inflation.

They predict current-quarter headline CPI inflation to average
2.3%, up from 2.0% in the last survey. Their prediction for
current-quarter headline PCE inflation is unchanged at 2.0%.

Current-quarter core PCE is projected to rise by 1.6%, while core
CPI is expected to come in at 1.8% — down from 2.0% in the previous
survey.

Measured on a fourth-quarter over fourth-quarter basis, headline
CPI inflation is expected to average 1.9% in 2012, a slight uptick from
1.8% in the last survey. The forecasts for 2.2% in 2013 and 2.3% 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% in
2012, 2.0% in 2013, and 2.2% in 2014.

Over the next 10 years, the forecasters expect headline CPI
inflation to average 2.30% at an annual rate, a lower estimate compared
to the last survey, when the forecasters thought headline CPI inflation
from 2012 to 2021 would average 2.35%.

The Philadelphia Fed noted there is also a small derease in the
corresponding estimate for 10-year annual-average headline PCE
inflation, now at 2.10% from 2.20% previous.

** MNI Washington Bureau: 202-371-2121 **

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