Midyear Economic Forecast: Lower Inflation, Slow Growth
Core inflation is likely to fall in the range of 1.8% to 2.0%, with GDP growth between 1.75% and 2%, says Morningstar's Bob Johnson.
Bob Johnson: Today we want to review our midyear economic forecast, which frankly is little change from our prior estimates. The one category that's the biggest change and worth talking about is our inflation forecast. We had thought at the beginning of the year that core inflation might heat up to as much as 2.6%. It now looks like it may be more likely in the range of 1.8 to 2.0%.
Certainly falling cellphone service prices is a good part of that number--it takes off 0.2% all by itself--but certainly food price increases have also moderated more than we would have expected. Also from the auto sector, as a lot of cars come off lease, used car prices have frankly gone through the floor and that's had some spillover effect in pulling down a new car prices as well. Those factors have all ganged up, if you will, to keep inflation lower than what we had expected.