Bloomberg's Monthly Economic Survey Lacks Predictive Power

Includes: DIA, IEF, SPY
by: Bespoke Investment Group

Bloomberg released its monthly survey of 65 economists Friday, and below we highlight the median estimates for a number of economic indicators. As most would have predicted, economist projections for the US economy got worse since the January survey.

As shown below, the consensus among economists surveyed is for GDP in Q1 '08 to now grow by just 0.50% -- down from 1.10% last month. The first quarter is forecast to be the worst, however, with growth slowly increasing through the remainder of the year. By Q4 '08, GDP is expected to be back at +2.50%. Unfortunately, CPI estimates were raised and consumer spending estimates were lowered as well.

As far as rates are concerned, economists expect the Fed Funds Rate to eventually drop to 2.50% and stay there for the remainder of the year. It should be noted that economists didn't predict the most recent rate cuts, however, since just last month they expected the Fed Funds Rate to be no lower than 3.50% by the end of 2008. The Fed Funds Rate is currently at 3.00%.

While these estimates provide a good gauge of the current sentiment of economists, they don't offer much predictive power.

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