US economic outlook strengthens, inflation progress bumpy: Survey

The US economic outlook has slightly improved and a key measure of inflation is set to continue its downward trend, a Federal Reserve Bank of Philadelphia survey of professional economic forecasters showed on Monday.
 

Real GDP is forecast to grow at a 1.3% annual rate this quarter, up 0.1 percentage point from the last survey three months ago, with the annual rate seen rising to 1.7% at the end of 2024.

The Philadelphia Fed's latest snapshot of the views of 34 leading economic forecasters also revealed they project headway in the U.S. central bank's battle to bring inflation back down to its 2% target rate, although progress will be bumpy.

For example, the current-quarter headline Consumer Price Index (CPI) inflation will average 3.3% at an annual rate, up from 2.9% at the time of the last survey, but will fall to a level below previous estimates by the third quarter of next year.

Similarly, they forecast headline Personal Consumption Expenditures (PCE) inflation this current quarter to be 2.9% at an annual rate, up slightly from 2.8% previously, but with a similar fall below previous estimates by the third quarter of 2024.

In much better news for the Fed, the forecasters see more straightforward progress on the so-called core measures for both CPI and PCE inflation, which strip out the more volatilie components of food and energy.

Core CPI is seen dipping to 3.0% this current quarter on an annual basis, down from 3.2% at the time of the last survey, while core PCE is forecast to decline to 2.7% this quarter, compared to 2.8% previously. By the end of 2024, core CPI is projected to be at 2.3% at an annual rate and core PCE at 2.2%.

Forecasters expect only a small rise in unemployment despite the Fed's most aggressive tightening cycle in a generation. They see the unemployment rate at 3.9% this quarter, up 0.2% percentage points from the previous estimate. They then expect it to move up to 4.2% by the end of next year.