Economic Outlook Symposium: Summary of 2009 results and forecasts for 2010 by ProQuest


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									ESSAYS ON ISSUES                                                   THE FEDERAL RESERVE BANK                             FEBRUARY 2010
                                                                   OF CHICAGO                                           NUMBER 271

Chicago Fed Letter
Economic Outlook Symposium: Summary of 2009 results and
forecasts for 2010
by William A. Strauss, senior economist and economic advisor, and Britton Lombardi, associate economist

According to participants in the Chicago Fed’s annual Economic Outlook Symposium, solid
economic growth is forecasted for the nation in 2010, following a very sharp contraction
during 2008 and the first half of 2009; inflation is expected to increase in 2010; and the
unemployment rate is predicted to peak early in 2010 and edge lower throughout the year.

                                                                   The Federal Reserve Bank of Chicago                  Depression. Conditions in the financial
                                                             held its twenty-third annual Economic                      markets improved markedly through-
                                                             Outlook Symposium on December 4,                           out 2009, although even by the end of
                                                             2009. More than 120 economists and                         the year conditions would still have been
                                                                               analysts from busi-                      considered “tight.”
1. Median forecast of GDP and related items                                    ness, academia, and
                                                                                                                        In part supported by the federal govern-
                                                                               government attended
                                                 2008      2009       2010                                              ment’s Car Allowance Rebate System
                                               (Actual) (Forecast) (Forecast)  the conference. This
                                                                                                                        (more commonly known as the cash-
                                                                               Chicago Fed Letter reviews
Real gross domestic product        a
                                                  –1.9     –0.4         2.5                                             for-clunkers program), output growth
Real personal consumption expenditures             a
                                                  –1.8       1.0        2.0    the forecasts from the
                                                                                                                        moved substantially higher in the third
Real business fixed investment         a
                                                 –6.0     –14.8         3.5    previous Economic
Real residential investment    a
                                                –21.0     –11.8        11.4                                             quarter of 2009. Real GDP rose by 2.2%
Change in private inventories      b
                                                –37.4     –66.9        25.0    Outlook Symposium for
                                                                                                                        in the third quarter, the fastest quarterly
Net exports of goods and services          b
                                              –470.9     –355.0     –375.0     2009 and then analyzes
Real government consumption                                                                                             growth rate in two years.
   expenditures and gross investment           a
                                                   3.1       2.0        1.4    the forecasts for 2010
Industrial production  a
                                                 –6.7      –5.5         4.0    (see figure 1) and sum-                  The housing sector, which has been con-
Car and light truck sales (millions of units)     13.2      10.2       11.4
Housing starts (millions of units)               0.90      0.57        0.74    marizes the presenta-                    tracting since 2005, continued to be a
Unemployment rate  c
                                                   6.9      10.1        9.8    tions from the most                      substantial drag on the economy through
Consumer Price Index                               1.5       1.2        2.2
One-year Treasury rate (constant maturity)       0.99  c
                                                           0.45        1.20    recent symposium.1                       the first half of 2009. Residential invest-
Ten-year Treasury rate (constant maturity)c                3.25   3.41    4.00                                          ment fell by over 30% (SAAR) in the
J. P. Morgan Trade-Weighted Dollar Indexa                   9.2   –5.7    –1.8                 The fallout from the
Oil price (dollars per barrel of                                                                                        first half of 2009. Residential investment
                                                                                               financial crisis that
   West Texas Intermediate)c                            58.37          77.50         82.51                              as a share of GDP fell from a record 6.3%
                                                                                               began in September
Percent change, fourth quarter over fourth quarter.                                                                     in the fourth quarter of 2005 to 2.4%
Billions of chained (2000) dollars in the fourth quarter at a seasonally adjusted annual rate. 2008 weighed heavily
Fourth quarter average.                                                                                                 in the second quarter of 2009. In what
                                                                                               on the economy in the
NOTE: These values reflect forecasts made in November 2009.                                                             appears to be the start of the recovery
SOURCES: Actual data from authors’ calculations and Haver Analytics; median forecast from      fourth quarter of 2008
Economic Outlook Symposium participants.                                                                                for the housing sector, residential invest-
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