Courtesy of Doug Short.
On Friday of next week (January 27th) we’ll get the Advance Estimate for Q4 GDP from the Bureau of Economic Analysis. Meanwhile, the Wall Street Journal’s January Survey of economists is now available. Let’s see what their crystal ball is telling them about Q4 GDP (download Excel File).
First, some context: The BEA’s Final Estimate for Q3 GDP came in at 1.8 percent, a downward revision from the 2.0 percent Second Estimate, which was a downward revision from the Preliminary Estimate of 2.5 percent.
With the successive downward revisions in Q3 GDP, have the economists become less optimistic in their forecasts for Q4? No indeed! In December the forecast median and mean for Q4 GDP was 2.9 and 2.8, respectively, with a mode (the most frequent forecast) of 3.0 (see the previous survey). In January the median and mean have risen to 3.2 and 3.1, respectively, and the mode is a stunning 3.5 percent. The latest mode is above the 3.3 average GDP since the inception of quarterly GDP reporting in the late 1940s and over double the 1.7 percent 10-year moving average of GDP (illustrated here).
What about Q1 2012 GDP? We see the same pattern as last month — a contraction in optimism. The median and mean drop to 2.1 and 2.2, reflectively, and the mode is 2.0, a big tumble from 3.5 for Q4 2011.
Thus far we’ve looked at the forecasts for quarterly GDP. What about the WSJ survey forecast for 2012 annual GDP? The most recent the Federal Reserve economic projections date from November 2nd, which are available here (click on the PDF attachment). The Fed’s range of estimates for 2012 was 2.3 to 3.5, with a “central tendency” of 2.5 to 2.9.
Now let’s have a look at what the WSJ economists think about the 2012 annual number.
So, with a 2.4 percent mean and 2.3 percent median, the economists are a bit less optimistic than the Fed about next year’s growth.
Odds of a Recession
The WSJ survey questionnaire again this month included a question about the probability, on a scale of 1 to 100, of a US recession in the next 12 months. None of the economists in January offered a negative GDP forecast; however the average response to the probability question was 19%, a small drop from last December’s 22%, which was a decline from November’s 25%. The “wildcard”, as one economist put it, is the situation in Europe, which scored 46% on that 1-to-100 probability scale as already in a recession.
