For a while, the most accurate forecaster on Bloomberg’s panel of economic experts, Dean Maki, was ahead. His forecast for 2010 was 3.5% GDP growth. But now Goldman Sachs has stepped up to the plate with its end of year revisions and predicted 4.4% GDP growth for 2010 and 4.5% for 2010. The Blue Chip Economic Indicators newsletter for November found forecasters had raised their 2010 projections for gross domestic product for a fourth straight month in a row. The U.S. economy should expand 2.7% next year, according to the latest consensus, the newsletter said. That marked an upward revision from the 2.5 percent pace the survey panel had expected a month before. But that itself was a month ago.
Earlier forecasts by others just several months back had placed GDP growth for 2010 in the 1.8% to 2.1% range, but no one believes those forecasts any more, except maybe a few economists who want a new stimulus package. Other forecasters are also raising their 2010 and 2011 forecasts. Virtually no one is now seeing a collapse in the second half of the year. The economy is clearly improving from all we see. This is not to say we don’t have problems. It is to say our economy is doing better.
If these forecasts hold up, the US economy will clearly be emerging reasonably well from recession, although unemployment will remain a problem. Too, in regard to predictions, historically on many counts it is usually not prudent to bet against Goldman Sachs. Their prescience and ability to profit from it have a proven track record, even if we do not always like their techniques and methods.
Why the upgrades? Part of it is retail sales are improving a bit. Initial jobless claims are dropping. The housing market is improving in many areas, although the real dog units stay unsold. Construction is picking up. Durable goods are no longer absolutely dead in the water. Programs are afoot for regulatory reform and bank restructuring. However, there is a lot still of doom and gloom regarding our prospects, especially on this website. Present day Rome is about to fall according to many. I attribute that to a comment made by a famous economist named A. C. Pigou, Alfred Marshall’s most favored student. Pigou basically said that Optimism is born and grows as a normal child into adulthood, but that once a crisis befalls us, Pessimism is born full grown. We have certainly had our crisis and have clearly been burned.
But what I report is good news (for a change). Shoot, with these forecasts, the Fed might even allow interest rates to rise a bit later in 2010. But O.K., Permabears, it is time to start growling and flaying about.
Disclosure: none relevant