Macroblog

Higher inflation, lower growth is the consensus of the economists interviewed in the latest Wall Street Journal survey (page A4 of today's print edition):

This month's WSJ.com economic forecasting survey showed projections for gross domestic product and employment growth were cut, while forecasts for consumer prices and oil prices were lifted. Economists continued to nudge higher their estimates of the probability of a recession over the next 12 months; on average, they put the likelihood at 26%, up from 20% in June and just 15% in February.

Economists, on average, forecast GDP growth at a 2.8% annual rate for the third quarter, the first time their forecast for that quarter has been under 3% since the economic forecasting survey first asked about the period in November 2005...

Amid the rising forecasts for energy prices, the economists revised forecasts for inflation upward. The average expectation is for a 3.3% year-to-year increase in the Labor Department's consumer-price index in November, compared with an earlier average forecast of 3.1%. While economists retained the view that inflation will slow in 2007, their forecast for CPI in May 2007 was also lifted, to 2.8% from a previous estimate of a 2.5% rise.

Average forecast for monthly gains in nonfarm payrolls over the next 12 months.

Survey Average High Low Aug. 2006 122,790 170,000 0 June 2006 140,582 200,000 0 May 2006 170,012 225,000 123,750 April 2006 176,944 287,000 105,000 Mar. 2006 178,340 287,000 95,000 Feb. 2006 179,377 287,000 90,000 Dec. 2005 178,513 287,000 90,000 Nov. 2005 170,352 287,000 70,000

Twenty-nine of 56 economists expect the Fed to raise rates again this year beyond the current 5.25% target. However, 54% -- 27 of 50 who answered the question -- said they believe that rates should either stay where they are or be trimmed before the end of the year.