Prospects for Economic Output: The WSJ Survey

The WSJ just released its newest survey of economists' views on the course of the economy. From the article:

On average, the 52 economists surveyed now expect gross domestic product to contract in the third and fourth quarters of this year, as well as the first quarter of 2009.

This is the first time that survey forecasts for those periods have turned negative. If those predictions bear out, it would mark the first time U.S. GDP -- the total value of goods and services produced -- has contracted for three consecutive quarters in more than a half century. Economists put the odds of recession in the next 12 months at 89%, up from 60% in last month's survey.

Here's what the data imply for the trajectory of GDP, along with a comparison against the September survey.

Figure 1: GDP in Ch.2000$ SAAR, from 26 Sep release (blue line), from 28 Aug release (red), and implied GDP levels from WSJ survey (October, teal) and (September, green). Potential GDP in dark blue. Source: BEA, WSJ [xls], CBO [xls], and author's calculations.

The next graph depicts the mean forecast against the highest growth projections for the next two quarters (from Mark Nielson of MacroEcon Global Advisers) and the lowest (from Mickey D. Levy from Bank of America).

Figure 2: GDP in Ch.2000$ SAAR, from 26 Sep release (blue line), and implied GDP levels from WSJ survey (October, teal) and highest for 2008H2 (green), and lowest (red). Source: BEA, WSJ [xls], and author's calculations.

Comments

[whidbey:]

Your analysis is rather passe'. If the recession is evident today, and the trajectory is still down you are lagging the future trend. I suspect that we will find that the depression is a surprise, but simple trend analysis shows that the market/productivity correlation is not flat to negative. In short, we will lose jobs and productivity (economic output) over the next year and that will push the economy into territory it has not crossed since 1937. We do have more serious problems than you suggest.

2008 Oct 09 08:34 PM