from the Philadelphia Fed
The 19 participants in the June Livingston Survey predict sharply higher output growth for the first half of 2021 than they predicted in the December 2020 survey. The forecasters, who are surveyed by the Federal Reserve Bank of Philadelphia twice a year, now project that the economy’s output (real GDP) will grow at an annual rate of 7.8 percent during the first half of 2021.
The economic rebound is expected to continue in the second half of 2021 when growth is expected to be at an annual rate of 6.7 percent. Both projections represent sharp upward revisions from those of the December 2020 survey. Growth will average an annual rate of 3.7 percent in the first half of 2022.
The forecasters see a lower unemployment rate in the first half of 2021 than they predicted previously, with continued recovery in the second half of 2021. The forecasters predict that the unemployment rate will be 5.7 percent in June 2021 and 4.7 percent in December 2021. The unemployment rate is expected to fall to 4.4 percent in June 2022.
Forecasters Hike Their Projections for Inflation in 2021 and 2022
On an annual-average over annual-average basis, CPI inflation is expected to be 3.3 percent in 2021 and 2.5 percent in 2022. Both projections are revised upward from the forecasts in the December 2020 survey. PPI inflation for finished goods is expected to be 6.0 percent this year, a notable upward revision from 2.4 percent in the previous survey. The forecasters predict PPI inflation will average 2.8 percent in 2022.
Lower Projections for Short-Term Interest Rates but Higher Projections for Long-Term Interest Rates
The panelists lowered their forecasts for interest rates on three-month Treasury bills compared with the forecasts of six months ago. The interest rate on three-month Treasury bills is now predicted to be 0.03 percent at the end of June 2021. The forecasters predict the three-month rate will be 0.07 percent at the end of December 2021. The forecasters see the three-month rate at 0.08 percent at the end of June 2022, and they expect it to increase a bit to 0.10 percent at the end of December 2022.
Upward revisions to the forecasts for the 10-year Treasury rate accompany the downward revisions to the forecasts for the three-month rate. The interest rate on 10-year Treasury bonds is predicted to be 1.70 percent at the end of June 2021, up from 1.00 percent in the December survey. The forecasters predict the 10-year rate will rise to 1.90 percent at the end of December 2021 and 2.00 percent at the end of June 2022. The 10-year Treasury bond interest rate is expected to reach 2.20 percent at the end of December 2022.
Notable Upward Revisions to Long-Term Inflation but Unchanged Outlook for Long-Term Growth
The forecasters now predict that inflation (measured by the CPI) will be 2.50 percent annually over the next 10 years, marking an upward revision from 2.23 percent in the December 2020 survey. The forecasters see real GDP growing 2.20 percent annually over the next 10 years, the same rate they predicted previously.
Forecasters Predict Higher and Increasing Stock Prices
The panelists predict the S&P 500 index will finish the first half of 2021 at a level of 4212.9. Stock prices are expected to rise to 4292.2 at the end of 2021 and continue to rise to 4382.8 at the end of June 2022. The index is predicted to reach 4474.3 by the end of 2022. All forecasts for stock prices mark upward revisions from those of the December 2020 survey.
Technical Notes
This survey release reports the median value across the 19 forecasters on the survey’s panel. On May 28, 2021, the Board of Governors released its usual annual revision to industrial production and capacity utilization. This revision included a change to the base year of industrial production from 2012 to 2017. Many panelists reported on the old base year (2012), and a few reported on the new base year (2017). For this report, all projections for the level of industrial production have been rescaled to the 2012 base year.
The Philadelphia Fed’s Livingston Survey is the oldest survey of economists’ expectations. The survey was started in 1946 by the late columnist Joseph A. Livingston. It summarizes the forecast of economists from industry, government, banking, and academia. It is published twice a year, in June and December.
Source
https://www.philadelphiafed.org/-/media/frbp/assets/surveys-and-data/livingston-survey/2021/livjun21.pdf
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