The Economy

Economists Lower Q2 Growth Forecast to 2.5%

Philly Fed poll shows forecasters expecting only modest rebound from shaky first quarter.
Matthew HellerMay 18, 2015

Economists aren’t expecting much of a rebound in U.S. economic growth in 2015 after a shaky start to the year, according to the Federal Reserve Bank of Philadelphia.

In its second-quarter survey of economists, the Philly Fed said forecasters predict real GDP will grow at an annual rate of 2.5% this quarter, down from 3.0% in February. Third-quarter 2015 growth was forecast at 3.1%, up from 2.8% in February’s survey, but full-year growth for 2015 was forecast at 2.4%, down from the previous estimate of 3.2%.

The survey mirrored a staff report from the New York Fed that forecast growth will rebound to around 2.5% over the remainder of 2015 and 2016 — below its estimate at this time last year.

CFO Insights on Inflation, Workforce Challenges, and Future Plans 

CFO Insights on Inflation, Workforce Challenges, and Future Plans 

Download our 2022 survey report for a high-level view of finance team projections and strategies, directly from our executive readers.

While many of the underlying fundamentals of the economy are positive for growth, the report said, households and businesses “have shown more restraint in their spending than we expected and we have lowered our projections for future spending growth from those sectors.”

“In addition,” the N.Y. Fed continued, “lower oil prices have reduced investment in domestic oil exploration, which will have a negative effect on business investment over the short run. Finally, the appreciation of the dollar and subdued global growth are expected to lead to a negative growth contribution from net exports.”

The Wall Street Journal noted that 3% is considered a level of growth strong enough to get the labor market back to fuller health, for the foreseeable future. Forecasters polled by the Philly Fed see real GDP growth of 2.8% in 2016 and 2017 respectively, with the rate easing to 2.5% in 2018.

The Philly Fed offered a slightly brighter outlook for unemployment, with forecasters predicting that the unemployment rate will be an annual average of 5.4% in 2015, before falling to 5.0% in 2016, and 4.8% each in 2017 and 2018.

But the pace of hiring was expected to decelerate in the current quarter compared with previous expectations, with an average rate of monthly non-farm job growth seen around 195,300 versus a previous forecast of 233,800. For the third quarter, job growth is expected to average 223,300, a touch higher than the prior forecast of 222,000.

4 Powerful Communication Strategies for Your Next Board Meeting