News Release
U.S. Economic Growth Will Be Somewhat Below Potential in 2008, Chicago Fed Economic Outlook Symposium Participants Say
The nation’s economic growth is expected to remain steady in 2008, inflation is predicted to decline next year, and the unemployment rate is forecasted to rise through 2008, according to the median forecast of participants at the Federal Reserve Bank of Chicago’s Economic Outlook Symposium. The consensus outlook shows that real gross domestic product (GDP) is forecasted to increase 2.5% both this year and in 2008. Inflation, as measured by the Consumer Price Index, is expected to rise 3.6% this year and then moderate to 2.6% in 2008. The unemployment rate is forecasted to edge up to 4.7% by the end of this year and rise to 5.0% by the end of next year, suggesting that overall growth in the economy is somewhat below potential.
The twenty-first annual Economic Outlook Symposium, held in Chicago on November 30, drew participants from manufacturing, banking, auto industries, academia, consulting and service firms. One session of the symposium presented the results from the consensus economic outlook. This year, 33 individuals provided forecasts for major components of real GDP as well as several key statistics for the U.S. economy.
All major components of real GDP are expected to contribute to the softening expected in economic growth next year. Most major real GDP components are anticipated to continue expanding in 2008, albeit at a slower pace than in 2007. The drag from the housing sector is forecasted to moderate next year. In particular, the consensus outlook shows residential investment is expected to decrease 15.9% this year and then become less of a drag, falling by 4.0% in 2008. Symposium participants anticipated that light vehicle sales will decline to 16.0 million units in 2008. Oil prices are expected to jump just above $90 in the final quarter of this year and decline by the end of next year, but still remain above $80. Additionally, real personal consumption expenditures are projected to stay constant at 2.5% in the coming year. Housing starts are expected to drop from 1.35 million units in 2007 to 1.21 million units in 2008. Industrial production growth is forecasted to ease from a 2.6% increase in 2007 to a 2.5% increase next year. Short-term interest rates are expected to rise 17 basis points in 2008, while long-term rates are predicted to increase 30 basis points over the same time period. The trade-weighted dollar is expected to edge lower in 2008.
A summary of the twenty-first annual Economic Outlook Symposium will be published in an upcoming issue of the Chicago Fed Letter.
—William A. Strauss, Senior Economist and Economic Advisor, (312) 322-8151
| Forecasts from the Twenty-First Annual Economic Outlook Symposium | |||
| 2006 (Actual) |
2007 (Forecast) |
2008 (Forecast) |
|
| Real Gross Domestic Producta | 2.6 | 2.5 | 2.5 |
| Real Personal Consumption Expendituresa | 3.4 | 2.5 | 2.2 |
| Real Business Fixed Investmenta | 5.2 | 6.1 | 3.7 |
| Real Residential Investmenta | –12.8 | –15.9 | –4.0 |
| Change in Private Inventoriesb | 17.4 | 17.3 | 25.4 |
| Net Exports of Goods and Servicesb | –597.3 | –514.4 | –507.3 |
| Real Government Consumption Expenditures and Gross Investmenta | 2.5 | 2.3 | 2.0 |
| Industrial Productiona | 3.5 | 2.6 | 2.5 |
| Car & Light Truck Sales (Millions of Units)c | 16.5 | 16.1 | 16.0 |
| Housing Starts (Millions of Units)c | 1.81 | 1.35 | 1.21 |
| Unemployment Rate | 4.5 | 4.7 | 5.0 |
| Consumer Price Indexa | 1.9 | 3.6 | 2.6 |
| 1-year Treasury Rate (Constant Maturity) |
4.99 | 4.11 | 4.28 |
| 10-year Treasury Rate (Constant Maturity) |
4.63 | 4.50 | 4.80 |
| JPMorgan Trade-Weighted Dollar Indexa | –3.6 | –4.2 | –0.7 |
| Oil Price (Dollars per Barrel of West Texas Intermediate) | 60.09 | 90.19 | 82.50 |
aFourth quarter over fourth quarter percent change.
bBillions of chained (2000) dollars in the fourth quarter at a seasonally adjusted annual rate.
cFourth quarter average, percent.
