Philadelphia Fed Survey Increases Growth Forecast
WASHINGTON -- Forecasters surveyed quarterly by the Federal Reserve Bank of Philadelphia expect the economy to grow faster this year than they did previously, but they don't expect inflation to be any worse this year.</br></br>The median of the 37 forecasts is for the U.S. economy to expand at an annual rate of 3.2% in the current quarter, 2.8% in the third quarter and 2.7% in the fourth; three months ago, they were predicting inflation-adjusted growth rates of 2.7%, 1.9% and 2.4%, respectively.</br></br>After a hiccup in consumer prices in the current quarter because of higher oil prices, the economists expect consumer-price inflation to calm to a 2.1% pace in 1999 and rise slightly to 2.3% in 2000, the same as they did in a February survey. Over the next decade, the forecasters expect 2.5% annual increases in the consumer-price index.</br></br>But the Philadelphia Fed cautioned that two-thirds of the new forecasts were received before the government reported a surprisingly sharp increase in the CPI in April.</br></br>As they have in previous surveys, the forecasters said they expect the year 2000 computer glitch to increase inflation-adjusted growth by an average of 0.3 percentage point this year and shave 0.3 point off growth early next year. As a result, the forecasters expect the economy to slow to a 1.8% growth rate in the first quarter of 2000 and then to rebound to a 3.0% pace in the second.