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Contact: Patti Lorenzen
Media Representative
612-204-5261
Patti.Lorenzen@mpls.frb.org

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Minneapolis Fed Forecasts Modest Economic Expansion in the U.S. and District Economies in 2003

MINNEAPOLIS, December 11, 2002—The Federal Reserve Bank of Minneapolis announced the national and regional economic outlook for 2003 at a media briefing today at the Minneapolis Fed, 10 a.m. CDT. This forecast includes information from the Minneapolis Fed's statistical models and results from the annual business conditions outlook poll. The following information will be available in detail in the January 2003 issue of the fedgazette.

National Economic Forecast*

  • Moderate growth is projected for the national economy in 2003.
  • Unemployment rate will likely increase slightly.
  • Gains in productivity will continue next year.
  • Modest increases in the U.S. Consumer Price Index are anticipated for 2003

District Economic Forecast

  • The district economy is expected to expand modestly in 2003, according to a poll of business leaders and the Minneapolis Fed's regional forecasting models.
  • Gains in employment are predicted to come slowly across the district, while overall economic activity may pick up.
  • Housing units authorized are forecast to increase in most district states.
  • Wages and prices are expected to increase slowly.

District Business Leaders Poll Results **

Despite the threat of war and a breakdown in investor confidence, most Ninth District business leaders expect the national and district economy to strengthen in 2003. Respondents to the November business outlook poll anticipate modest growth in national economic activity and inflation. Most are optimistic about their community's economy but still expect decreases in local employment, investment, consumer spending and housing starts. Leaders predict increasing sales and prices for their companies, but level employment and capital spending, although a war would hurt their company's financials. Meanwhile, wages are expected to increase modestly.

* Forecast from national and regional models developed by researchers at the Minneapolis Fed. The models use a statistical procedure called the Bayesian vector autoregression.

** Key findings from a poll of 345 business leaders in the Ninth Federal Reserve District, conducted in November 2002.

As one of the 12 Federal Reserve Banks, the Federal Reserve Bank of Minneapolis contributes to a variety of Federal Reserve System functions, including operation of a nationwide payments system, distribution of the nation’s currency and coin, supervision and regulation of member banks and bank holding companies, and serving as a fiscal agent for the U.S. Treasury. Additionally, the president of the Minneapolis Fed serves as a member of the Federal Open Market Committee, the monetary policymaking arm of the Federal Reserve’s Board of Governors.

Together with its branch in Helena, Mont., the Minneapolis Fed serves the Ninth Federal Reserve District, which includes Minnesota, Montana, North and South Dakota, 26 counties in northwestern Wisconsin and the Upper Peninsula of Michigan.

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