Release Date: May 11, 2018 SECOND QUARTER 2018 Slightly Brighter Outlook for Growth and Labor Markets in 2018 and 2019 The U.S. economy looks slightly stronger now than it did three months ago, according to 36 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The forecasters predict real GDP will grow at an annual rate of 3.0 percent this quarter and next quarter, up slightly from the estimates of three months ago. On an annual-average over annual-average basis, the forecasters predict real GDP growing 2.8 percent in 2018, 2.7 percent in 2019, 1.9 percent in 2020, and 2.0 percent in 2021. The forecasters see a marginally brighter outlook for the unemployment rate. The forecasters predict the unemployment rate will average 3.9 percent in 2018, 3.7 percent in 2019, 3.9 percent in 2020, and 4.0 percent in 2021. The projections for 2018 and 2019 are slightly below those of the last survey, indicating a better outlook for unemployment. The panelists also predict an improvement in employment for 2018 and 2019. The projections for the annual-average level of nonfarm payroll employment suggest job gains at a monthly rate of 185,900 in 2018, up from the previous estimate of 175,100, and 160,800 in 2019, up from 150,300 estimated three months ago. (These annual-average estimates are computed as the year-to-year change in the annual-average level of nonfarm payroll employment, converted to a monthly rate.)

Median Forecasts for Selected Variables in the Current and Previous Surveys

Real GDP (%) Unemployment Rate (%) Payrolls (000s/month) Previous New Previous New Previous New Quarterly data: 2018:Q2 2.9 3.0 4.0 3.9 171.1 181.0 2018:Q3 2.8 3.0 3.9 3.9 168.7 175.0 2018:Q4 2.5 2.8 3.8 3.8 151.8 160.4 2019:Q1 2.4 2.4 3.8 3.8 172.9 160.9 2019:Q2 N.A. 2.6 N.A. 3.7 N.A. 151.7 Annual data (projections are based on annual-average levels): 2018 2.8 2.8 4.0 3.9 175.1 185.9 2019 2.5 2.7 3.8 3.7 150.3 160.8 2020 2.0 1.9 3.9 3.9 N.A. N.A. 2021 1.7 2.0 4.0 4.0 N.A. N.A.

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The charts below provide some insight into the degree of uncertainty the forecasters have about their projections for the rate of growth in the annual-average level of real GDP. Each chart presents the forecasters’ previous and current estimates of the probability that growth will fall into each of 11 ranges. The charts show that the probabilities for the next four years are similar to those of the previous survey.

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The forecasters’ density projections for unemployment, shown below, shed light on uncertainty about the labor market over the next four years. Each chart presents the forecasters’ current estimates of the probability that unemployment will fall into each of 10 ranges. The charts show the panelists are raising their density estimates for an unemployment rate below 4.0 percent from 2018 to 2021.

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Higher Inflation in 2018 The forecasters expect current-year headline CPI inflation to average 2.5 percent, up from 2.1 percent in the last survey. Headline PCE inflation for 2018 will be 2.1 percent, up 0.2 percentage point from the previous estimate. However, the forecasters’ projections for inflation beyond 2018 are mostly unchanged compared with the previous survey. Headline CPI inflation is expected to average 2.2 percent in 2019 and 2.3 percent in 2020, unchanged from the last survey. The forecasters have revised slightly their projections for headline PCE inflation in 2019 and 2020 to 2.1 percent, from 2.0 percent previously. Over the next 10 years, 2018 to 2027, the forecasters expect headline CPI inflation to average 2.30 percent at an annual rate, up marginally from the previous estimate of 2.25 percent. The corresponding estimate for 10-year annual-average PCE inflation is 2.00 percent, unchanged from the estimate of three months ago. Median Short-Run and Long-Run Projections for Inflation (Annualized Percentage Points)

Headline CPI Core CPI Headline PCE Core PCE Previous Current Previous Current Previous Current Previous Current Quarterly 2018:Q2 2.0 1.9 2.1 2.2 1.9 2.0 1.9 2.0 2018:Q3 2.3 2.2 2.2 2.3 1.9 2.0 1.9 2.1 2018:Q4 2.2 2.3 2.2 2.3 1.9 2.0 1.9 2.1 2019:Q1 2.3 2.3 2.3 2.4 2.0 2.1 2.0 2.1 2019:Q2 N.A. 2.2 N.A. 2.4 N.A. 2.0 N.A. 2.0 Q4/Q4 Annual Averages 2018 2.1 2.5 2.2 2.5 1.9 2.1 1.9 2.2 2019 2.2 2.2 2.3 2.4 2.0 2.1 2.0 2.1 2020 2.3 2.3 2.4 2.4 2.0 2.1 2.0 2.1 Long-Term Annual Averages 2018-2022 2.20 2.20 N.A. N.A. 2.00 2.00 N.A. N.A.

2018-2027 2.25 2.30 N.A. N.A. 2.00 2.00 N.A. N.A.

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The charts below show the median projections (the red line) and the associated interquartile ranges (gray areas around the red line) for the projections for 10-year annual-average CPI and PCE inflation. The charts highlight a slightly higher level of the long-term projection for CPI inflation and an unchanged long-term projection for PCE inflation.

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The figures below show the probabilities that the forecasters are assigning to the possibility that fourth-quarter over fourth-quarter core PCE inflation in 2018 and 2019 will fall into each of 10 ranges. For both years, the forecasters have increased the probability that core PCE inflation will be above 2.0 percent, compared with their estimates in the survey of three months ago.

Low Risk of a Negative Quarter The forecasters have revised downward the chance of a contraction in real GDP in any of the next four quarters. For the current quarter, the forecasters predict a 5.3 percent chance of negative growth, down from 9.1 percent in the survey of three months ago. The panelists have also made downward revisions to their probability estimates for the next three quarters. Risk of a Negative Quarter (%) Survey Means

Quarterly data: Previous New 2018:Q2 9.1 5.3 2018:Q3 11.4 8.6 2018:Q4 13.6 11.1 2019:Q1 16.8 14.4 2019:Q2 N.A. 15.6

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The Federal Reserve Bank of Philadelphia thanks the following forecasters for their participation in recent surveys:

Lewis Alexander, Nomura Securities; Scott Anderson, Bank of the West (BNP Paribas Group); Robert J. Barbera, Johns Hopkins University Center for Financial Economics; Peter Bernstein, RCF Economic and Financial Consulting, Inc.; Christine Chmura, Ph.D., and Xiaobing Shuai, Ph.D., Chmura Economics & Analytics; Gary Ciminero, CFA, GLC Financial Economics; Gregory Daco, Oxford Economics USA, Inc.; Rajeev Dhawan, Georgia State University; Gabriel Ehrlich, Daniil Manaenkov, Owen Nie, and Aditi Thapar, RSQE, University of Michigan; Michael R. Englund, Action Economics, LLC; J.D. Foster, U.S. Chamber of Commerce; Michael Gapen, Barclays Capital; Sacha Gelfer, Bentley University; James Glassman, JPMorgan Chase & Co.; Jan Hatzius, Goldman Sachs; Keith Hembre, Nuveen Asset Management; Peter Hooper, Deutsche Bank Securities, Inc.; Sam Kahan, Kahan Consulting Ltd. (ACT Research LLC); N. Karp, BBVA Research USA; Walter Kemmsies, Jones Lang LaSalle; Jack Kleinhenz, Kleinhenz & Associates, Inc.; Thomas Lam, Independent Economist; L. Douglas Lee, Economics from Washington; John Lonski, Moody’s Capital Markets Group; Macroeconomic Advisers, IHS Markit; R. Anthony Metz, Pareto Optimal Economics; Michael Moran, Daiwa Capital Markets America; Joel L. Naroff, Naroff Economic Advisors; Michael Neal, National Association of Home Builders; Mark Nielson, Ph.D., MacroEcon Global Advisors; Luca Noto, Anima Sgr; Brendon Ogmundson, BC Real Estate Association; Arun Raha and Maira Trimble, Eaton Corporation; Philip Rothman, East Carolina University; Chris Rupkey, MUFG Union Bank; John Silvia, Wells Fargo; Sean M. Snaith, Ph.D., University of Central Florida; Constantine G. Soras, Ph.D., CGS Economic Consulting; Stephen Stanley, Amherst Pierpont Securities; Charles Steindel, Ramapo College of New Jersey; Susan M. Sterne, Economic Analysis Associates, Inc.; James Sweeney, Credit Suisse; Thomas Kevin Swift, American Chemistry Council; Mark Zandi, Moody’s Analytics. This is a partial list of participants. We also thank those who wish to remain anonymous.

Technical Notes Moody's Aaa and Baa Historical Rates The historical values of Moody's Aaa and Baa rates are proprietary and, therefore, not available in the data files on the Bank’s website or on the tables that accompany the survey’s complete write-up in the PDF.

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SUMMARY TABLE SURVEY OF PROFESSIONAL FORECASTERS MAJOR MACROECONOMIC INDICATORS ___________________________________ ___________________________ 2018 2018 2018 2019 2019 2018 2019 2020 2021 Q2 Q3 Q4 Q1 Q2 (YEAR-OVER-YEAR) ___________________________________ ___________________________ PERCENT GROWTH AT ANNUAL RATES 1. REAL GDP 3.0 3.0 2.8 2.4 2.6 2.8 2.7 1.9 2.0 (BILLIONS, CHAIN WEIGHTED) 2. GDP PRICE INDEX 1.9 2.1 2.1 2.2 2.1 2.0 2.1 N.A. N.A. (PERCENT CHANGE) 3. NOMINAL GDP 5.1 5.0 4.9 5.0 4.6 4.9 4.8 N.A. N.A. ($ BILLIONS) 4. NONFARM PAYROLL EMPLOYMENT (PERCENT CHANGE) 1.5 1.4 1.3 1.3 1.2 1.5 1.3 N.A. N.A. (AVG MONTHLY CHANGE) 181.0 175.0 160.4 160.9 151.7 185.9 160.8 N.A. N.A. VARIABLES IN LEVELS 5. UNEMPLOYMENT RATE 3.9 3.9 3.8 3.8 3.7 3.9 3.7 3.9 4.0 (PERCENT) 6. 3-MONTH TREASURY BILL 1.8 2.0 2.2 2.4 2.6 1.9 2.7 3.1 3.0 (PERCENT) 7. 10-YEAR TREASURY BOND 3.0 3.1 3.2 3.3 3.5 3.0 3.5 3.7 3.7 (PERCENT) ___________________________________ ____________________ 2018 2018 2018 2019 2019 2018 2019 2020 Q2 Q3 Q4 Q1 Q2 (Q4-OVER-Q4) ___________________________________ ____________________ INFLATION INDICATORS 8. CPI 1.9 2.2 2.3 2.3 2.2 2.5 2.2 2.3 (ANNUAL RATE) 9. CORE CPI 2.2 2.3 2.3 2.4 2.4 2.5 2.4 2.4 (ANNUAL RATE) 10. PCE 2.0 2.0 2.0 2.1 2.0 2.1 2.1 2.1 (ANNUAL RATE) 11. CORE PCE 2.0 2.1 2.1 2.1 2.0 2.2 2.1 2.1 (ANNUAL RATE) Note: The figures on each line are medians of 36 forecasters. Source: Research Department, Federal Reserve Bank of Philadelphia. Survey of Professional Forecasters, Second Quarter 2018.

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SURVEY OF PROFESSIONAL FORECASTERS

Second Quarter 2018

Tables Note: Data in these tables listed as "actual" are the data that were available to the forecasters when they were sent the survey questionnaire on April 27, 2018; the tables do not reflect subsequent revisions to the data. All forecasts were received on or before May 8, 2018.

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TABLE ONE MAJOR MACROECONOMIC INDICATORS MEDIANS OF FORECASTER PREDICTIONS ACTUAL FORECAST ACTUAL FORECAST NUMBER ______ ______________________________________ ______ ______________________________ OF 2018 2018 2018 2018 2019 2019 2017 2018 2019 2020 2021 FORECASTERS Q1 Q2 Q3 Q4 Q1 Q2 ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ____________________________________________________________________________________________________________________________________ 1. GROSS DOMESTIC PRODUCT (GDP) 33 19965 20214 20464 20711 20966 21206 19391 20337 21321 N.A. N.A. ($ BILLIONS) 2. GDP PRICE INDEX 33 114.85 115.40 115.99 116.59 117.23 117.82 113.43 115.70 118.14 N.A. N.A. (2009=100) 3. CORPORATE PROFITS AFTER TAXES 16 N.A. 1834.1 1852.5 1880.7 1911.1 1929.2 1697.9 1844.1 1947.9 N.A. N.A. ($ BILLIONS) 4. UNEMPLOYMENT RATE 34 4.1 3.9 3.9 3.8 3.8 3.7 4.4 3.9 3.7 3.9 4.0 (PERCENT) 5. NONFARM PAYROLL EMPLOYMENT 29 148053 148605 149130 149611 150094 150549 146624 148855 150785 N.A. N.A. (THOUSANDS) 6. INDUSTRIAL PRODUCTION 31 106.5 107.5 108.3 109.0 109.7 110.4 103.7 107.8 110.5 N.A. N.A. (2012=100) 7. NEW PRIVATE HOUSING STARTS 31 1.32 1.32 1.32 1.33 1.35 1.37 1.21 1.32 1.34 N.A. N.A. (ANNUAL RATE, MILLIONS) 8. 3-MONTH TREASURY BILL RATE 32 1.56 1.80 1.99 2.18 2.44 2.60 0.93 1.87 2.69 3.08 3.00 (PERCENT) 9. MOODY'S AAA CORP BOND YIELD * 23 N.A. 4.03 4.19 4.30 4.45 4.56 N.A. 4.05 4.60 N.A. N.A. (PERCENT) 10. MOODY'S BAA CORP BOND YIELD * 25 N.A. 4.80 4.95 5.04 5.22 5.30 N.A. 4.81 5.40 N.A. N.A. (PERCENT) 11. 10-YEAR TREASURY BOND YIELD 34 2.76 2.95 3.10 3.22 3.32 3.47 2.33 3.00 3.46 3.66 3.73 (PERCENT) 12. REAL GDP 35 17386 17516 17645 17767 17873 17988 17096 17580 18050 18401 18768 (BILLIONS, CHAIN WEIGHTED) 13. TOTAL CONSUMPTION EXPENDITURE 34 12066.8 12151.6 12229.1 12301.3 12373.6 12446.6 11890.7 12188.4 12480.7 N.A. N.A. (BILLIONS, CHAIN WEIGHTED) 14. NONRESIDENTIAL FIXED INVESTMENT 33 2400.8 2433.3 2465.8 2499.3 2526.5 2556.0 2314.2 2449.7 2569.0 N.A. N.A. (BILLIONS, CHAIN WEIGHTED) 15. RESIDENTIAL FIXED INVESTMENT 33 605.0 610.2 614.8 619.3 624.4 630.2 597.9 612.2 632.7 N.A. N.A. (BILLIONS, CHAIN WEIGHTED) 16. FEDERAL GOVERNMENT C & I 33 1131.0 1137.0 1143.4 1149.6 1155.9 1165.5 1116.4 1140.3 1166.1 N.A. N.A. (BILLIONS, CHAIN WEIGHTED) 17. STATE AND LOCAL GOVT C & I 34 1797.2 1801.5 1805.7 1811.1 1817.2 1823.1 1785.0 1803.3 1823.4 N.A. N.A. (BILLIONS, CHAIN WEIGHTED) 18. CHANGE IN PRIVATE INVENTORIES 32 33.1 35.1 40.4 43.0 45.0 44.0 15.2 37.9 50.0 N.A. N.A. (BILLIONS, CHAIN WEIGHTED) 19. NET EXPORTS 33 -645.9 -656.1 -661.9 -674.0 -681.2 -689.6 -621.8 -658.5 -697.9 N.A. N.A. (BILLIONS, CHAIN WEIGHTED) * The historical values of Moody's Aaa and Baa rates are proprietary and therefore not available to the general public. Source: Research Department, Federal Reserve Bank of Philadelphia. Survey of Professional Forecasters, Second Quarter 2018.

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TABLE TWO MAJOR MACROECONOMIC INDICATORS PERCENTAGE CHANGES AT ANNUAL RATES NUMBER Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 2017 2018 2019 2020 OF TO TO TO TO TO TO TO TO TO FORECASTERS Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 2018 2019 2020 2021 ____________________________________________________________________________________________________________________________ 1. GROSS DOMESTIC PRODUCT (GDP) 33 5.1 5.0 4.9 5.0 4.6 4.9 4.8 N.A. N.A. ($ BILLIONS) 2. GDP PRICE INDEX 33 1.9 2.1 2.1 2.2 2.1 2.0 2.1 N.A. N.A. (2009=100) 3. CORPORATE PROFITS AFTER TAXES 16 7.8 4.1 6.2 6.6 3.9 8.6 5.6 N.A. N.A. ($ BILLIONS) 4. UNEMPLOYMENT RATE 34 -0.2 -0.0 -0.1 -0.0 -0.0 -0.5 -0.2 0.2 0.1 (PERCENT) 5. NONFARM PAYROLL EMPLOYMENT (PERCENT CHANGE) 29 1.5 1.4 1.3 1.3 1.2 1.5 1.3 N.A. N.A. (AVG MONTHLY CHANGE) 29 181.0 175.0 160.4 160.9 151.7 185.9 160.8 N.A. N.A. 6. INDUSTRIAL PRODUCTION 31 3.8 3.0 2.6 2.5 2.6 4.0 2.5 N.A. N.A. (2012=100) 7. NEW PRIVATE HOUSING STARTS 31 0.2 0.1 4.8 4.7 4.6 9.1 1.7 N.A. N.A. (ANNUAL RATE, MILLIONS) 8. 3-MONTH TREASURY BILL RATE 32 0.24 0.19 0.19 0.26 0.16 0.94 0.82 0.39 -0.08 (PERCENT) 9. MOODY'S AAA CORP BOND YIELD * 23 N.A. 0.16 0.11 0.15 0.11 N.A. 0.55 N.A. N.A. (PERCENT) 10. MOODY'S BAA CORP BOND YIELD * 25 N.A. 0.15 0.09 0.18 0.08 N.A. 0.59 N.A. N.A. (PERCENT) 11. 10-YEAR TREASURY BOND YIELD 34 0.19 0.15 0.12 0.10 0.15 0.67 0.46 0.20 0.07 (PERCENT) 12. REAL GDP 35 3.0 3.0 2.8 2.4 2.6 2.8 2.7 1.9 2.0 (BILLIONS, CHAIN WEIGHTED) 13. TOTAL CONSUMPTION EXPENDITURE 34 2.8 2.6 2.4 2.4 2.4 2.5 2.4 N.A. N.A. (BILLIONS, CHAIN WEIGHTED) 14. NONRESIDENTIAL FIXED INVESTMENT 33 5.5 5.4 5.6 4.4 4.8 5.9 4.9 N.A. N.A. (BILLIONS, CHAIN WEIGHTED) 15. RESIDENTIAL FIXED INVESTMENT 33 3.5 3.0 3.0 3.3 3.8 2.4 3.3 N.A. N.A. (BILLIONS, CHAIN WEIGHTED) 16. FEDERAL GOVERNMENT C & I 33 2.1 2.3 2.2 2.2 3.4 2.1 2.3 N.A. N.A. (BILLIONS, CHAIN WEIGHTED) 17. STATE AND LOCAL GOVT C & I 34 0.9 0.9 1.2 1.3 1.3 1.0 1.1 N.A. N.A. (BILLIONS, CHAIN WEIGHTED) 18. CHANGE IN PRIVATE INVENTORIES 32 2.0 5.3 2.6 2.0 -1.0 22.7 12.1 N.A. N.A. (BILLIONS, CHAIN WEIGHTED) 19. NET EXPORTS 33 -10.2 -5.8 -12.1 -7.2 -8.4 -36.7 -39.4 N.A. N.A. (BILLIONS, CHAIN WEIGHTED) * The historical values of Moody's Aaa and Baa rates are proprietary and therefore not available to the general public. Note: Figures for unemployment rate, 3-month Treasury bill rate, Moody's Aaa corporate bond yield, Moody's Baa corporate bond yield, and 10-year Treasury bond yield are changes in these rates, in percentage points. Figures for change in private inventories and net exports are changes in billions of chain-weighted dollars. All others are percentage changes at annual rates. Source: Research Department, Federal Reserve Bank of Philadelphia. Survey of Professional Forecasters, Second Quarter 2018.

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TABLE THREE MAJOR PRICE INDICATORS MEDIANS OF FORECASTER PREDICTIONS ACTUAL FORECAST(Q/Q) ACTUAL FORECAST(Q4/Q4) NUMBER ______ ___________________________________________ ______ __________________________ OF 2018 2018 2018 2018 2019 2019 2017 2018 2019 2020 FORECASTERS Q1 Q2 Q3 Q4 Q1 Q2 ANNUAL ANNUAL ANNUAL ANNUAL ___________________________________________________________________________________________________________________________________ 1. CONSUMER PRICE INDEX 33 3.5 1.9 2.2 2.3 2.3 2.2 2.1 2.5 2.2 2.3 (ANNUAL RATE) 2. CORE CONSUMER PRICE INDEX 32 3.0 2.2 2.3 2.3 2.4 2.4 1.7 2.5 2.4 2.4 (ANNUAL RATE) 3. PCE PRICE INDEX 32 2.7 2.0 2.0 2.0 2.1 2.0 1.7 2.1 2.1 2.1 (ANNUAL RATE) 4. CORE PCE PRICE INDEX 31 2.5 2.0 2.1 2.1 2.1 2.0 1.5 2.2 2.1 2.1 (ANNUAL RATE) Source: Research Department, Federal Reserve Bank of Philadelphia. Survey of Professional Forecasters, Second Quarter 2018.

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TABLE FOUR YIELD SPREADS MEDIANS OF FORECASTER PREDICTIONS ACTUAL FORECAST ACTUAL FORECAST NUMBER ______ ______________________________________ ______ ______________________________ OF 2018 2018 2018 2018 2019 2019 2017 2018 2019 2020 2021 FORECASTERS Q1 Q2 Q3 Q4 Q1 Q2 ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ____________________________________________________________________________________________________________________________________ 1. TBOND MINUS TBILL 32 1.20 1.11 1.08 1.08 0.98 0.80 1.40 1.11 0.80 0.70 0.85 (PERCENTAGE POINTS) 2. AAA MINUS TBOND 23 N.A. 1.04 1.07 1.10 1.08 1.10 N.A. 1.03 1.09 N.A. N.A. (PERCENTAGE POINTS) 3. BAA MINUS TBOND 25 N.A. 1.80 1.83 1.84 1.84 1.84 N.A. 1.80 1.85 N.A. N.A. (PERCENTAGE POINTS) 4. BAA MINUS AAA 23 N.A. 0.76 0.79 0.80 0.80 0.80 N.A. 0.77 0.80 N.A. N.A. (PERCENTAGE POINTS) Notes: TBOND is the rate on 10-year Treasury bonds. TBILL is the rate on 3-month Treasury bills. AAA is the rate on Moody's Aaa corporate bonds. BAA is the rate on Moody's Baa corporate bonds. The historical values for interest rate spreads for Moody's Aaa and Baa rates are proprietary and therefore not available to the general public. Each interest rate spread is computed as the median value of the forecasters' spreads. These median values may differ from those computed as the difference between the median values of each interest rate in the spread. Source: Research Department, Federal Reserve Bank of Philadelphia. Survey of Professional Forecasters, Second Quarter 2018.

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TABLE FIVE ESTIMATED PROBABILITY OF DECLINE IN REAL GDP ESTIMATED Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 PROBABILITY TO TO TO TO TO (CHANCES IN 100) Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 NUMBER OF FORECASTERS 10 OR LESS 26 22 17 10 10 11 TO 20 4 8 11 19 14 21 TO 30 0 0 2 1 6 31 TO 40 0 0 0 0 0 41 TO 50 0 0 0 0 0 51 TO 60 0 0 0 0 0 61 TO 70 0 0 0 0 0 71 TO 80 0 0 0 0 0 81 TO 90 0 0 0 0 0 91 AND OVER 0 0 0 0 0 NOT REPORTING 6 6 6 6 6 MEAN AND MEDIAN MEDIAN PROBABILITY 5.00 10.00 10.00 15.00 15.00 MEAN PROBABILITY 5.33 8.59 11.08 14.41 15.64 Note: Total number of forecasters reporting is 30. Source: Research Department, Federal Reserve Bank of Philadelphia. Survey of Professional Forecasters, Second Quarter 2018.

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TABLE SIX MEAN PROBABILITIES MEAN PROBABILITY ATTACHED TO POSSIBLE CIVILIAN UNEMPLOYMENT RATES: (ANNUAL AVERAGE) 2018 2019 2020 2021 _________ _________ _________ _________

9.0 PERCENT OR MORE 0.00 0.00 0.00 0.04 8.0 TO 8.9 PERCENT 0.00 0.00 0.09 0.13 7.5 TO 7.9 PERCENT 0.00 0.00 0.08 0.20 7.0 TO 7.4 PERCENT 0.00 0.07 0.38 0.88 6.5 TO 6.9 PERCENT 0.00 0.12 1.14 2.39 6.0 TO 6.4 PERCENT 0.11 0.37 2.74 4.39 5.5 TO 5.9 PERCENT 0.18 2.35 6.45 8.95 5.0 TO 5.4 PERCENT 2.18 7.39 15.20 17.19 4.0 TO 4.9 PERCENT 39.93 33.89 30.91 29.64 LESS THAN 4.0 PERCENT 57.60 55.80 43.00 36.19 MEAN PROBABILITY ATTACHED TO POSSIBLE PERCENT CHANGES IN REAL GDP: (ANNUAL-AVERAGE OVER ANNUAL-AVERAGE) 2017-2018 2018-2019 2019-2020 2020-2021 _________ _________ _________ _________

6.0 PERCENT OR MORE 0.01 0.32 0.31 0.41 5.0 TO 5.9 PERCENT 0.29 0.83 0.90 0.93 4.0 TO 4.9 PERCENT 4.33 4.56 3.50 3.59 3.0 TO 3.9 PERCENT 28.74 20.87 10.96 9.73 2.0 TO 2.9 PERCENT 48.97 44.11 33.71 30.34 1.0 TO 1.9 PERCENT 12.28 17.91 24.13 28.62 0.0 TO 0.9 PERCENT 3.78 7.30 16.53 14.46 -1.0 TO -0.1 PERCENT 1.20 2.99 6.72 8.65 -2.0 TO -1.1 PERCENT 0.14 0.74 2.22 2.12 -3.0 TO -2.1 PERCENT 0.25 0.36 0.72 0.73 LESS THAN -3.0 PERCENT 0.01 0.01 0.29 0.42 MEAN PROBABILITY ATTACHED TO POSSIBLE PERCENT CHANGES IN GDP PRICE INDEX: (ANNUAL-AVERAGE OVER ANNUAL-AVERAGE) 2017-2018 2018-2019 _________ _________

4.0 PERCENT OR MORE 0.02 0.46 3.5 TO 3.9 PERCENT 0.39 1.58 3.0 TO 3.4 PERCENT 3.14 6.12 2.5 TO 2.9 PERCENT 15.53 19.65 2.0 TO 2.4 PERCENT 48.73 40.24 1.5 TO 1.9 PERCENT 25.50 23.47 1.0 TO 1.4 PERCENT 5.31 6.28 0.5 TO 0.9 PERCENT 1.18 1.56 0.0 TO 0.4 PERCENT 0.18 0.40 LESS THAN 0.0 PERCENT 0.04 0.24 Source: Research Department, Federal Reserve Bank of Philadelphia. Survey of Professional Forecasters, Second Quarter 2018.

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TABLE SEVEN MEAN PROBABILITY OF CORE CPI AND CORE PCE INFLATION (Q4/Q4) MEAN PROBABILITY ATTACHED TO CORE CPI INFLATION: 17Q4 TO 18Q4 18Q4 TO 19Q4 ____________ ____________ 4.0 PERCENT OR MORE 0.22 1.27 3.5 TO 3.9 PERCENT 1.05 2.68 3.0 TO 3.4 PERCENT 8.91 9.48 2.5 TO 2.9 PERCENT 32.78 27.05 2.0 TO 2.4 PERCENT 37.26 35.40 1.5 TO 1.9 PERCENT 16.39 18.48 1.0 TO 1.4 PERCENT 2.75 4.32 0.5 TO 0.9 PERCENT 0.45 0.91 0.0 TO 0.4 PERCENT 0.16 0.35 LESS THAN 0.0 PERCENT 0.02 0.07 MEAN PROBABILITY ATTACHED TO CORE PCE INFLATION: 17Q4 TO 18Q4 18Q4 TO 19Q4 ____________ ____________ 4.0 PERCENT OR MORE 0.10 0.56 3.5 TO 3.9 PERCENT 0.36 1.17 3.0 TO 3.4 PERCENT 2.25 4.58 2.5 TO 2.9 PERCENT 16.31 16.43 2.0 TO 2.4 PERCENT 46.91 39.05 1.5 TO 1.9 PERCENT 26.22 28.14 1.0 TO 1.4 PERCENT 5.98 7.64 0.5 TO 0.9 PERCENT 1.52 1.67 0.0 TO 0.4 PERCENT 0.31 0.56 LESS THAN 0.0 PERCENT 0.05 0.20 Source: Research Department, Federal Reserve Bank of Philadelphia. Survey of Professional Forecasters, Second Quarter 2018.

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TABLE EIGHT LONG-TERM (5-YEAR AND 10-YEAR) INFLATION FORECASTS ANNUAL AVERAGE OVER THE NEXT 5 YEARS: 2018-2022 =============================================== CPI INFLATION RATE PCE INFLATION RATE ------------------------- ------------------------- MINIMUM 1.90 MINIMUM 1.70 LOWER QUARTILE 2.16 LOWER QUARTILE 1.90 MEDIAN 2.20 MEDIAN 2.00 UPPER QUARTILE 2.49 UPPER QUARTILE 2.30 MAXIMUM 3.40 MAXIMUM 2.90 MEAN 2.36 MEAN 2.10 STD. DEVIATION 0.35 STD. DEVIATION 0.28 N 28 N 29 MISSING 8 MISSING 7 ANNUAL AVERAGE OVER THE FOLLOWING 5 YEARS: 2023-2027 ========================================================== CPI INFLATION RATE PCE INFLATION RATE ------------------------- ------------------------- MINIMUM 1.60 MINIMUM 1.58 LOWER QUARTILE 2.09 LOWER QUARTILE 2.00 MEDIAN 2.23 MEDIAN 2.08 UPPER QUARTILE 2.40 UPPER QUARTILE 2.20 MAXIMUM 3.60 MAXIMUM 3.10 MEAN 2.28 MEAN 2.10 STD. DEVIATION 0.34 STD. DEVIATION 0.28 N 28 N 29 MISSING 8 MISSING 7 ANNUAL AVERAGE OVER THE NEXT 10 YEARS: 2018-2027 ================================================ CPI INFLATION RATE PCE INFLATION RATE ------------------------- ------------------------- MINIMUM 2.00 MINIMUM 1.68 LOWER QUARTILE 2.10 LOWER QUARTILE 2.00 MEDIAN 2.30 MEDIAN 2.00 UPPER QUARTILE 2.38 UPPER QUARTILE 2.20 MAXIMUM 3.50 MAXIMUM 3.00 MEAN 2.32 MEAN 2.10 STD. DEVIATION 0.31 STD. DEVIATION 0.25 N 28 N 29 MISSING 8 MISSING 7 Note: The summary statistics for each forecast horizon are computed on a sample of panelists that may differ from one horizon to the next. The usual identity linking the 10-year horizon to the two underlying five-year horizons may not hold in the results. Source: Research Department, Federal Reserve Bank of Philadelphia. Survey of Professional Forecasters, Second Quarter 2018.