The Second Quarter 2026 Survey of Professional Forecasters reveals a shift in economic outlook, with forecasters anticipating a slowdown in growth and a higher risk of contraction in the second half of 2026. The survey, conducted by the Federal Reserve Bank of Philadelphia, highlights several key insights into the U.S. economy's trajectory.
Economic Growth and Unemployment
Forecasters predict a modest 2.1% growth rate for the second quarter of 2026, unchanged from the previous survey. However, they foresee lower growth in the subsequent quarters, with an average annual growth rate of 2.2% for 2026, down from the previous estimate. The unemployment rate is expected to remain stable at 4.4% to 4.5% over the next four years, indicating a tight labor market.
Inflation and Interest Rates
Inflation is a significant concern, with forecasters expecting higher inflation rates in 2026. The headline CPI inflation is projected to average 6.0% in the current quarter, up from 2.7% previously. Core CPI inflation is also anticipated to rise to 3.2%, compared to 2.8%. These higher inflation rates may prompt the Federal Reserve to maintain or increase interest rates.
Risk of Contraction
The risk of a contraction in real GDP has decreased slightly, with a 17.9% probability for the second quarter, down from 20.9%. However, the forecasters have increased the probability of negative growth for the following quarters, indicating a more uncertain economic outlook.
Commentary
These findings suggest that the U.S. economy may be facing a period of moderation, with potential challenges in the second half of 2026. The stable unemployment rate and higher inflation could impact consumer spending and business investments. As an expert, I find it intriguing that forecasters are adjusting their predictions, indicating a dynamic and evolving economic landscape. The survey's insights provide valuable guidance for policymakers and investors, offering a glimpse into the future of the U.S. economy.
