U.S. economic growth looks to slow over the next year as housing starts decline, while the near-term outlook for inflation eased on falling energy prices, a quarterly survey by the Philadelphia Federal Reserve Bank showed on Monday.
According to Reuters, the results of the Philly Fed’s “Survey of Professional Forecasters” also showed the outlook for the labor market as holding steady, despite a weaker outlook for growth.
The 51 forecasters pegged current quarter growth in real gross domestic product at an annual rate of 2.5%, down from the previous fourth-quarter forecast of 2.9%. For the first quarter of 2007, they forecast growth at an annual rate of 2.7%, down from 2.9%.
“The downward revisions for growth are mostly from a fall in residential investment, which also shows up in housing starts,” said Tom Stark, a manager in the Philadelphia Fed’s economic research department.
“By contrast, personal spending and business investment are holding up,” he said, indicating any spillover from the decline in the residential sector has yet to emerge.
The survey showed residential fixed investment at a decline of 7.8% for 2007, a much steeper fall than the 4.5% drop forecast for the period in the previous survey. Housing starts were expected to fall 10.8% this year and 12.1% next year.
The U.S. economy grew at a sharply slower pace of 1.6% in the third quarter, down from 2.6% in the three months to June.
For the price outlook, the respondents forecast consumer price index (CPI) inflation will average an annual 2.4% in the fourth quarter, falling nearly 1 percentage point from a previous forecast of 3.3%.
But the longer-term outlook for inflation was little changed, with CPI inflation expected to average 2.5% in 2008, and 2.6% over the next five years.