Economic Forecasters Cut Estimate of Slowdown
WASHINGTON -- Economic forecasters surveyed quarterly by the Federal Reserve Bank of Philadelphia no longer expect as much of a slowdown in the U.S. economy during the first half of the year.</br></br>The average of the 33 private forecasts put growth in the first two quarters of 1999 at an annual 2.85% pace, well above the 1.7% they predicted just three months ago. The economy expanded at a 3.9% rate in 1998.</br></br>Despite the economy's stronger-than-expected growth, the forecasters are more optimistic about inflation than they were in previous surveys. They expect consumer prices to rise only 2% in 1999, marking down their forecasts to reflect changes in the government's consumer price index. Over the next decade, the forecasters expect the CPI to climb 2.3% a year.</br></br>With continued growth and little uptick in inflation, the forecasters expect the stock market to keep climbing over the next decade, but they foresee returns closer to the historical norm. On average, they expect the total return on the Standard & Poor's 500 index to be 8% a year after inflation, down from the 9% they forecast last year. The inflation-adjusted return on the S&P 500 last year exceeded 20%. The Philadelphia Fed doesn't probe for the forecasters' short-term outlook for the stock market.</br></br>Over the next decade, the forecasters are predicting that the U.S. economy will expand at about 2.5% a year, after adjusting for inflation, and that productivity, or output per hour of work, will climb 1.55%, up slightly from 1.5% in last quarter's survey.