Checking In On The WSJ Economists' Forecasts For GDP

by: Doug Short

The second estimate for Q1 GDP is over two weeks away, and there will be a third estimate one month later. However, for The Wall Street Journal's survey of economists, Q1 GDP is ancient history. The latest survey, conducted May 3-7 asks for four quarterly estimates beginning with Q2 and annual estimates through 2015.

Let's take a look at some of the views, focusing primarily on the remaining quarters in 2013. I'm using my usual graphing technique to illustrate the distribution of the individual forecasts.

As a reminder, the advance estimate for Q1 GDP came in at 2.5% (see my commentary). Here is the May WSJ spread of forecasts for Q2 GDP, and quite a spread it is with the top estimate 4.5 times higher than the lowest.

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The median (middle) forecast, which was also one of two modes (most frequent responses) was 1.8%. The average (mean) of the forecasts, at 1.9%, was skewed higher by the optimistic 3.6% outlier (which runs counter to the consensus that Q2 will be weaker than Q1). In fact, if we exclude the one outlier, the average drops to the 1.8% median.

When we flash forward to Q3, the optimistic outlier syndrome increases to the extent that I had to rescale the vertical axis a couple of percentage points higher.

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Interestingly enough, the Q3 mode of 2.0% remains close to the Q2 average 1.9%. Of course the Q3 average at 2.5% is again skewed by the upbeat responses. If we exclude the three outliers, the median and average response both come in at 2.3%.

What about Q4? The Q4 forecasts float a bit higher, again with some outliers to skew the median and average up a tenth of a percent.

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Forecasts for 2013 Annual GDP

I'll conclude this exercise with a look at the WSJ survey results for 2013 annual GDP estimates. I've also highlighted the Fed range in their latest projections.

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With the advance estimate of Q1 GDP at 2.5%, we see that the average and the mode for the annual number are little changed, down a tenth of a percent at 2.4%, although the median is a tad lower at 2.2%.