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posted on 10 December 2015

December 2015 Livingston Survey: Forecasters Predict Steady Growth and Unemployment Rate Declines

from the Philadelphia Fed

The 25 participants in the December Livingston Survey predict fairly persistent output growth through the end of 2016. The forecasters, who are surveyed by the Federal Reserve Bank of Philadelphia twice a year, project that the economy's output (real GDP) will grow at an annual rate of 2.1 percent for the second half of 2015.

They predict that the growth rate of economic output will be 2.5 percent (annual rate) in the first half of 2016 and 2.6 percent (annual rate) in the second half of 2016. The current projection for growth in the second half of 2015 is 1.0 percentage point lower than the projection from the survey of six months ago, while the forecast for the first half of 2016 is 0.4 percentage point lower.

The forecasters predict that the unemployment rate will decline even further than estimated in the June 2015 survey. The forecasters predict that the unemployment rate will be 4.9 percent in December 2015 and 4.8 percent in June 2016. The current projections for December 2015 and June 2016 are both down 0.2 percentage point from the last survey. The unemployment rate is projected to fall to 4.6 percent in December 2016.

On an annual-average over annual-average basis, CPI inflation is expected to be 0.1 percent in 2015 and 1.8 percent in 2016. The 2015 projection remains unchanged from the June survey, while the 2016 projection is down 0.3 percentage point. CPI inflation is expected to rise to 2.2 percent in 2017. PPI inflation is expected to be -3.2 percent in 2015 and 0.7 percent in 2016. The 2015 projections for PPI inflation remain unchanged from six months ago, although the projection for 2016 is 1.2 percentage points lower. PPI inflation is expected to rise to 2.4 percent in 2017.

The panelists have reduced their forecasts for the interest rates on three-month Treasury bills and 10-year Treasury bonds from six months ago. At the end of December 2015, the interest rate on three-month Treasury bills is predicted to be 0.23 percent, revised down from 0.59 percent in the survey six months ago. The forecasters predict that the three-month Treasury bill interest rate will be 0.68 percent at the end of June 2016 and 1.12 percent in December 2016. The rate is expected to rise to 2.03 percent in 2017. The interest rate on 10-year Treasury bonds is predicted to reach 2.30 percent at the end of December 2015, down from the previous estimate of 2.50 percent. Additionally, forecasters predict the 10-year rate will rise to 2.55 percent at the end of June 2016 and to 2.75 percent in December 2016, down from the previous projections of 2.84 percent and 3.00 percent, respectively. The forecasters expect the rate to rise to 3.09 percent in 2017.

The forecasters now predict that inflation (measured by the CPI) will grow 2.25 percent annually over the next 10 years, which is slightly higher than the forecast of 2.20 percent in the survey of six months ago. Real GDP growth is expected to average 2.25 percent over the next 10 years, lower than the projection of 2.50 percent from the previous survey.

The forecasters predict the S&P 500 index will finish 2015 at a level of 2090.0, a downward revision from the estimate of 2158.0 in the June 2015 survey. They also see stock prices increasing over the next two years, with the index rising to 2120.0 by the end of June 2016, to 2184.9 by the end of 2016, and then to 2298.0 by the end of 2017.


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