Professional Forecasters See 14-Month Recession

Forecasters expect gross domestic product growth to be negative for this quarter and next, with slightly fewer than half expecting the second quarter of 2009 to be negative, and almost one in three predicting the following quarter will also be negative, according to the Federal Reserve Bank of Philadelphia’s survey of professional forecasters released yesterday.

The forecasters project real GDP contracting at an annual rate of 2.9% in the fourth quarter and 1.1% in the first quarter of 2009, sharp downward revisions from the prior survey, when the forecasters anticipated 0.7% growth in the fourth quarter and 1.6% growth in the first quarter of 2009.

The forecasters estimate a recession began in April and will last 14 months.

The survey predicts 0.8% growth in the second quarter of 2009, 0.9% in the third quarter, and 2.3% in the fourth quarter.

The forecasters also showed more pessimism about the labor market, expecting unemployment to rise from 6.6% this quarter to 7.6% in the third quarter of 2009, higher than the earlier forecast of 5.8% this quarter, rising to 6.0% in the third quarter.

The good news is on the inflation front, where forecasters see headline CPI inflation averaging 2.5% over the next five years, down from an estimate of 2.6%.

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER