COVER STORY | LOCAL PROFILE
2018 ECONOMIC FORECAST WHY IT TAKES SUPERHERO STRENGTH TO KEEP THE ECONOMY STRONG
Just like a page out of a comic book, where Superman or Wonder Woman swoops in to save the day, it appears that kind of superhero strength is needed when it comes to the economic outlook for the state and region. Ken Louie, Ph.D., director of the Economic Research Institute of Erie (ERIE) at Penn State Erie, The Behrend College, and an associate professor of Economics at the Black School of Business, points to historical trends, which suggest that the national economy tends to lead the local economy with its upturns and downturns during the business cycle. Robust economic performance at the national level usually has salutary effects on the local economy — a sort of economic “dynamic duo.”
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DECEMBER 2017 • mbabizmag.com
“Perhaps the best metaphor that describes the economic outlook for 2018 as it relates to Erie and Northwest Pennsylvania is a caped crusader to the rescue,” explains Dr. Louie. “Like Superman or any of the other superheroes, the national economy is helping to hoist the local economy and prevent it from sinking into economic recession.” How much punch the national economy has — whether the growth rate will continue to strengthen or begin to moderate — in the new year is being debated. For example, as Dr. Louie points out, the latest forecasts in PNC’s National Economic Outlook suggest that the U.S. economy will continue to strengthen for the rest of this year, with real GDP projected to increase by 2.9 percent in the fourth quarter, before growth slows
down to 2.3 percent in the first quarter of 2018. The Federal Reserve Bank of Philadelphia’s Survey of Professional Forecasters, the oldest quarterly survey of macroeconomic forecasts in the United States, indicates similar growth rates throughout the rest of this year and into 2018, with real GDP projected to increase by 2.6 percent in the fourth quarter, and 2.4 percent in the first quarter of 2018. Despite these variations, the common consensus — or storyline for 2018 — according to Dr. Louie, is that the U.S. economic growth will average around 2 percent to 2.5 percent between now and 2019. Yet, all eyes should be on three key indicators — economic growth,
The Big Picture
Despite the variation in short-term projections, economic forecasts made on an annual basis are more consistent across forecasting units, as shown in the table below. Here’s what economists are saying about the U.S. economy and how much it is expected to grow: Forecast of Percent Change in U.S. Real GDP PNC’s National Economic Outlook Philadelphia Fed’s Survey of Professional Forecasters Median forecasts by the Fed’s Federal Open Market Committee (FOMC) International Monetary Fund (IMF)
2017 2018 2019 2.2% 2.5% 2.1% 2.2% 2.5% 2.1% 2.4% 2.2%
2.1% 2.0% 2.3% 1.9%