from the Philadelphia Fed
The 24 participants in the December Livingston Survey predict lower output growth over the second half of 2019. The forecasters, who are surveyed by the Federal Reserve Bank of Philadelphia twice a year, project that real GDP will grow at an annual rate of 1.9 percent in the second half of 2019.
Projections hold steady at 1.9 percent (annual rate) in the first half of 2020 and reach 1.8 percent (annual rate) in the second half of 2020. Compared with the June survey, the projection marks a downward revision for the second half of 2019 but no revision for the first half of 2020.
The forecasters peg the unemployment rate in December 2019 at 3.5 percent (note that the forecasts were submitted before the December 6, 2019, employment report). The unemployment rate is predicted to remain steady at 3.5 percent in June 2020 through December 2020.
Lower Projections for CPI Inflation and PPI Inflation in 2019
On an annual-average over annual-average basis, CPI inflation is expected to be 1.8 percent in 2019 and 2.1 percent in 2020. The 2019 projection has been revised downward 0.1 percentage point from that of the June survey, while the 2020 prediction has been revised upward 0.1 percentage point. CPI inflation is expected to increase slightly to 2.3 percent in 2021. PPI inflation is expected to be 0.8 percent in 2019 and 1.7 percent in 2020. The 2019 and 2020 projections are 0.5 percentage point lower than the estimates from six months ago. PPI inflation is expected to be 1.8 percent in 2021.
Weaker Outlook for Short-Term and Long-Term Rates
The forecasters reduced their predictions for the rate on three-month Treasury bills and 10-year Treasury bonds, compared with their previous predictions. At the end of December 2019, the interest rate on three-month Treasury bills is predicted to be 1.58 percent. The forecasters predict that the three-month Treasury bill rate will be 1.59 percent at the end of June 2020 and 1.60 percent in December 2020. The rate is expected to be 1.72 percent in 2021. The interest rate on 10-year Treasury bonds is predicted to be 1.75 percent at the end of December 2019. Additionally, the forecasters predict the 10- year rate will be 1.88 percent at the end of June 2020 and 2.05 percent in December 2020. The forecasters expect the rate to be 2.41 percent in 2021. These predictions mark downward revisions from the previous survey in June 2019.
Somewhat Weaker Outlook for Long-Term Inflation and Output Growth
The forecasters now predict that inflation (measured by the CPI) will average 2.22 percent annually over the next 10 years, 0.04 percentage point less than the forecast in the June 2019 survey. The forecasters peg annual average real GDP growth at 2.00 percent over the next 10 years, 0.07 percentage point less than their prediction of six months ago.
Forecasters Raise Their Predictions for Stock Prices
The forecasters predict the S&P 500 index will finish 2019 at a level of 3130.0, an upward revision from the estimate of 2900.0 in the June 2019 survey. The forecasters see stock prices increasing over the next two years, with the index rising to 3202.0 by the end of June 2020, to 3257.6 by the end of 2020, and to 3400.0 by the end of 2021. All predictions have been revised upward.
Technical Notes
This news release reports the median value across the 24 forecasters on the survey’s panel. All forecasts were submitted before the December 6, 2019, employment report.
Source
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