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Posts Tagged ‘Philadelphia FED

Quarterly Phily FED survey

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Hey, gang!  It’s been a while!  I’ve been having a darned good winter, how about you?  It’s been busy, I’ll say that, hence the gap since my last post.

Anyway, as you may know by now, I’m a regular follower of the Phily Fed’s quarterly survey of economic forecasters.  It’s a delightfully simple model — just ask a not-so-random group of economist where they think the economy is headed, then look at both the central tendency (you know, mean, median, mode, that stuff) as well as the dispersion of forecasts (standard deviation, median absolute deviation, stuff like that).  The results are not only interesting in and of themselves, but also it’s fascinating to track what the forecasters were saying a quarter ago compared to what they’re saying now (which the FED does).

For example, the forecasters, PREVIOUSLY (end of the year last year) projected that GDP growth for 2018 would be 2.5% (real, annualized), the unemployment rate would be 4.1% on average (and 4.0% at year-end) and that we would add 163,400 folks to the nation’s payrolls on average each month during the year.  Today, however, these same forecasters have up’d the ante a bit, forecasting real GDP growth at 2.8% for the year, average unemployment at 4.0% (and ending the year at 3.8%) and adding 175,100 workers to payrolls per month.

Now, don’t get too excited, folks, because as with everything the “devil’s in the details.”  A big chunk of the change comes from shifting the shape of the new employment curve.  Previously, the forecasters projected a fairly flat payrolls change over the year — not bad, just flat.  However, new forecasts project this to be skewed to the early part of the year, and then declining after the summer.  Indeed, 2019 is currently projected to be anemic.  Early employment numbers has the effect of driving up GDP (people earn and spend money for more months in the year).  Note that when we look at the dispersion of GDP growth, there is some great news (very little sentiment for a recession this year) but also some not-so-great news (very little sentiment for growth above 4%).

The Phily FED also surveys for inflation projections, but that’s been flat-lined for years now.  Current CPI projections for the year are 2.1%, which is the same as previous projections.  Of more specific interest to us at Greenfield, the Phily FED is now reporting forecasts of house price growth for the coming two years, although rather than use their regular panel they are synopsizing several publicly available indices (Case-Shiller, FHFA, CoreLogic, and NAR).  In general these indices point to price growth from 4% to 5.2% this year, and slightly lower growth (3.3% to 5.1%) next year.

There’s a bit more to the survey, and if you’d like you’re own copy, just click here.

Written by johnkilpatrick

February 28, 2018 at 12:56 pm

Livingston Survey strengthens

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One of my economic “touchstones” is the semi-annual Livingston Survey, begun in 1946 by the famed economist and journalist Joseph A. Livingston.  The survey continues today under the auspices of the Philadelphia FED.  Twice a year they survey a panel of economic forecasters on the key metrics of unemployment, GDP growth, inflation, T-Bill and Bond rates, and the S&P 500.  Not only are their opinions of interest, but also the change in the central tendency of those opinions over time.

For example, six months ago, the panel forecasted that year-end unemployment would be 4.3%, with a slight decline to 4.2% by mid-year, 2018.  Now, this forecast has shifted slightly downward, with an expected year-end unemployment rate of 4.1%, mid-year 2018 projected at 4.0%, and year-end 2018 at 3.9%.  These are decidedly low numbers, and suggest an econonomy at nearly full steam. (“Frictional” unemployment, which is the lowest level we would normally see, is generally thought to be close to 3%.)

Previously, year-end GDP growth was projected to come in at about 2.5%.  That’s now up to 2.9%, settling back to about 2.5% by mid-year 2018.  Projections of inflation are also solid, with CPI ending the year at about 2.1% and PPI (producer price index) at about 3.0%.  Both of these estimates are slightly lower than previously forecasted.  Intriguingly, CPI is forecasted to stay about the same in the coming year, while PPI should decline to about 2.0% by the end of the year next year.

The cost of debt is projected to increase in 2018, albeit at modest rates (and lower than previously projected).  Previously, the 10-year bond rate was forecasted to end the year at about 2.75%, but now should end the year at about 2.45%, according to the panel.  Rates should rise in 2018, but more slowly than previously projected, ending 2018 around 3.0%

Finally, the June survey projected that the S&P 500 would end the year at 2470, but now the panelists think the market will end the year at 2644.  (I note that the S&P sits at 2691 as I write this.)  The S&P is projected to end 2018 at 2805, or about 6% higher for the year.

The full survey also contains data on a variety of other topics (auto sales, corporate profits, average weekly earnings, etc.).  You can subscribe by visiting the Phily Fed at


Written by johnkilpatrick

December 18, 2017 at 11:25 am

Livingston Survey

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I’ve noted in the past that one of my favorite economic forecasts comes from the Philadelphia FED.  The semi-annual Livingston Survey captures the sentiments of 28 leading economic forecasters on key metrics, such as unemployment, GDP growth, and inflation.  Year after year, the forecast remains fairly accurate and steady — much to the disappointment of politicians who fail to realize that the worlds largest non-centrally-planned economy changes course fairly slowly.

Of course, 2017 may be a bit of an exception.  Indeed, so was 2009.  The forecast can’t take into account shocks to the system (such as the recent economic melt-down) nor can it handle significant policy shifts from D.C.  I have some “gut” feelings that differ a bit from the Livingston folks, and I’ll note those at the end.

Now, on to the details.  GDP growth for the second half of 2016 was a bit better than had been previously forecast, coming in at about 2.7% rather than the previously forecast 2.4%.  Looking forward, the forecasters project a 2.2% annualized growth in the economy during the first half of the coming year, rising slightly to 2.4% in the second half of 2017.

Ironically, unemployment appears to be coming in slightly higher than forecasted, about 4.9% rather than the previously projected 4.7%.  Of course, neither of these numbers is anything to complain about.  Forecasters look to continued improvement in the unemployment numbers through the coming year, ending up around 4.6% next December.

Inflation measured by the consumer price index (CPI) is right on target at 1.3%.  Next year, forecasters are projecting 2.4% (slightly up from previous 2017 forecasts) and the crystal balls (which is all they are this far out) suggest 2.5% in 2018.  The yield curve is ending the year a bit steeper than previously projected.  Earlier forecasts put the short end (3-month T-Bill) at 0.75% and the long end (10-year) at 2.25%.  Currently, they see the year ending at 0.55% and 2.3% respectively.  For 2017, the soothsayers forecast a year-end 1.12% at the short end and 2.75% at the high.  This is somewhat higher at the high end and lower at the near end than had been projected previously, suggesting an expectation of higher overall interest rates in the future.  Finally, forecasters see the stock market rising over the next two years, but at a fairly lackluster rate.

I promised my own bit of forecasting.  During the tumultuous months surrounding the recent melt-down, I played a bit of follow-the-leader with this survey, and went on record that the melt-down would be short-lived.  Boy was I wrong!  As noted, this survey is pretty good when the economic ship is on a steady course, but doesn’t handle rough water very well.  For the past several years, we’ve had an unprecedented period of economic growth, by all metrics (GDP, stock prices, unemployment, and inflation).  Just from a pure market-cycle perspective, we may be overdue for some unpleasantries.  Looking at the political horizon, I’ve already noted that politicians are generally disappointed that the economy doesn’t move as quickly as they wish or even in the desired directly.  That said, we have a Congress that is frothing to trim the Federal budget, and will probably opt to do so in the transfer payments arena (welfare, health care subsidies, etc.).  They’ll hope to balance this with tax cuts.  However, tax cuts fall slowly, and on one sector of the economy, while entitlement cuts (and any budget cuts, for that matter) happen quickly and are usually borne by a different segment of the economy.   I think I’ll be watching GDP reports fairly closely for the next couple of years.  I would note what happened in the years leading up to the 1982 recession — not withstanding inflation (driving nominal interest rates), the economy looked OK in 1981, and the metrics were generally pointed in the right direction.  (For a good visual representation, I’d refer you to the August, 1981, report to Congress of the Council of Economic Advisors, a copy of which you can view on the St. Louis FED’s website by clicking here.)

All in all, we’ve been focused on politics for the past several months, and now we’re going to find if those political decisions have actual economic repercussions.  Stay tuned!

December’s Livingston Survey

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The late columnist Joseph A Livingston started surveying economists about their forecasts back in 1946. It’s the oldest continuing survey of its kind, and is continued twice a year under the auspices of the Philadelphia Federal Reserve Bank. One of the neat things about this semi-annual report is that it compares the current central tendency of projections to the projections which were being made six months ago. In short, we can directly compare how economic forecasts are changing over time.

One of the biggest shifts is in the GDP growth rate for the 2nd half of 2015.  Six months ago, economists were projecting that we’d end the year with a modestly healthy 3.1% annual rate of growth.  Now, economists are forecasting we’ll end the year at about 2.1% — a fairly significant shift in sentiment.  Similar declines in GDP growth are projected for 2016.  Check my prior blog post about the 12th District report on the western economy, and particularly the impact a stronger dollar is having on the export market.

The good news — and it’s slight — is an improvement in the projections about unemployment.  Six months ago, economists were forecasting we’d end the year with an unemployment rate of 5.1%.  This has now been revised downward, ever so slightly, to 4.9%.  Also, inflation continues to be dead-on-arrival.  From the end of 2014 to the end of 2015, the consumer price index is projected to rise only 0.1%, in line with prior forecasts, and the producer price index is actually projected to fall by 3.2%.  Both indices are expected to swell in the coming year, but only slightly.  The current CPI forecast for the coming year is 1.8%, and PPI is 0.7%.  I’ll leave it up to the reader to pick a reason for this, but can you say “energy costs”?

Six months ago, interest rates were forecasted to rise.  Actual increases are somewhat lower than previously forecasted.  Six months ago, forecasters predicted we’d end the year with 3-month T-bill rates at 0.59%.  In reality, the November 23 auction was at 0.14%, although rates are trending up in December (0.28% as of Monday) in anticipation of Fed rate increases.  The current forecast is for 3-month rates to end the year around 0.23%, and for 1-year rates to end around 2.3% (down from the previously forecasted 2.5%).  Forecasters currently predict 3-month T-bills will hit 1.12% by the end of 2016, and 10-year notes will end next year around 2.75%.

Finally, forecasters are asked to predict the S&P 500 index for the end of the year as well as the end of next year.  Six months ago, the consensus forecast was an S&P level of 2158 for the end of the year, and this has now softened to 2090.  (It’s helpful to note that the S&P opened just under 2048 this morning.)  Forecasters currently project the S&P will hit about 2185 by the end of next year, which is an anemic growth of 4.5% over the coming 12 months.

If you’d like your own copy, which includes much more detail on these forecasts, you can download it for free here.


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The gap in postings is a good indication of just how busy I’ve been the past several months. Whew….

Anyway, the latest semi-annual Livingston Survey just hit my desk from the Phily FED. Just to remind you, the Phily FED surveys a cross-section of top economic forecasters on four key issues — GDP growth, interest rates, unemployment, and inflation. Ironically, the survey came out before this week’s BEA announcement that GDP grew at an annual rate of 4.1% in the 3rd quarter (following a 2.5% growth in the 2nd quarter).

Nonetheless, the Livingston Survey gives a good snapshot of where professional forecasters think the economy will be over the next couple of years. Forecasters generally see GDP growth ending this year around 2.4%, increasing to an annualized rate of 2.5% early next year, and 2.8% in late 2014.

Interest rate forecasts were also surveyed before the recent FED pronouncements about tapering, although the general sense is that markets have been capturing the “taper” news for a while. Forecasters project t-bill rates to continue below 0.1% into 2014, rising to 0.15% by the end of next year, and 0.75% by the end of 2015. Ten-year bond yields should follow suit, with rates rising above 3% in mid-2014, up to 3.25% by the end of next year. Of course, time will tell on these projections.

Finally, unemployment is projected to dip below 7% after mid-2014, and finish the year around 6.7%. Inflation should hold below 2%, although it is projected to creep up somewhat from the current rates.

The Phily FED produces a series of economic surveys throughout the year. For more information, visit their research department.

Written by johnkilpatrick

December 21, 2013 at 6:22 pm

Quarterly Econ Survey from Phily FED

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One of my favorite regular “reads” is the Survey of Professional Forecasters” from the Philadelphia Federal Reserve Bank. The main survey comes out quarterly, with occasional special editions thrown in along the way. The brilliance of the survey is its simplicity — ask a large panel of economic forecasters where they think the economy is going in terms of a handful of key indicators — GDP, unemployment, inflation. Then calculate the median and the range of responses.

The medians are fairly predictable and “sticky” (that is, this quarter’s results look a lot like last quarter’s). However, the interesting stuff is buried in the way the distribution of results change. For example, both the last survey and the current survey find that the largest number of economists think unemployment will average between 7.0% and 7.4% next year (with a median of 7.1%), down somewhat from this year. That’s pretty predictable stuff. However, this year’s distribution is skewed to the low side (a very large number of economists think unemployment will dip this year and end up as low as 7% on average) but next year, the distribution is fairly even, with the bulk of economists forecasting anywhere from 6% to 8%. In short, 2014 is pretty cloudy right now, and that means that hedging your economic bets isn’t a bad idea.

GDP projections are somewhat less rosy. In the previous survey (2nd quarter, 2013), the largest number of economists projected 2013 GDP in the 2% to 3% range, with the median at 2%. Today, that has dropped a full half-percentage point, down to 1.5%. Previously, 2014 was projected at 2.8%, and that has now been downgraded to 2.6%, although as we’ve already established, 2014 is pretty much a guessing game.

Inflation continues to be pretty-much a flat line, with a lot of “1.8%” and “2.0%” on the chart. In short, hardly anyone sees inflation above 2.3% or so in the foreseeable future.

To download the full report, go to

Written by johnkilpatrick

August 16, 2013 at 8:53 am

Philadelphia FED Business Conditions Index

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While its focused on their region, the Philadelphia FED’s announcement this morning wasn’t good news, despite the spin they put on it. In short, the index declined significantly from October to November, albeit remaining in positive territory. To quote:

Responses to the Business Outlook Survey this month suggest that regional manufacturing is expanding, but at a slow pace. The survey’s broad indicators for activity, shipments, and new orders recorded positive readings this month, but all declined slightly from their October readings. Employment conditions improved, as indicated by increases in the indexes for employment and average workweek. The broadest indicator of future activity showed marked improvement, and firms were notably more optimistic about future employment.

In addition, inventories went up in the most recent survey, which is generally not very good news.

On the bright side, their survey of current and future activity is now at its highest level in quite some time, and future activity is also forecasted to continue strong. Hopefully, the October-to-November decline is simply a seasonal abberation, and not a long-term trend.

Courtesy, Philadelphia FED, November 17, 2011

Written by johnkilpatrick

November 17, 2011 at 9:54 am

Posted in Economy, Finance

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