Economists Temper Growth Forecasts

Forecasters dialed back their expectations for economic growth as the unemployment rate was seen remaining high for the rest of the year, a survey released on Friday showed.

The Philadelphia Federal Reserve's third-quarter survey of 48 forecasters showed economists expect gross domestic product to grow at an annual rate of 1.6% this quarter, down from May's estimate of 2.5%.

Expectations for the year were also trimmed, with the economy seen growing at a 2.2% pace in 2012, down from the previous 2.3%.

Analysts also raised the odds that the economy could contract in any of the next four quarters. For the third-quarter, the odds were lifted to 13.8% from May's 12.2%.

The labor market was seen faring worse. The jobless rate is expected to average 8.2% this year, before dropping to 7.9% in 2013.

Nonfarm payrolls were seen growing at a rate of 125,000 jobs a month in the third quarter, down from the 170,000 economists predicted in the previous survey.

Inflation expectations also cooled. Consumer prices in the third quarter were seen averaging 1.5 percent, down from earlier estimates of 2.3 percent. But core inflation, which strips out volatile items such as food and gasoline, was expected to average 2.2 percent, up from the previous 2.0 percent estimate.