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U.S. Economy GDP Forecasts 2012 and Recession Odds

Economics / US Economy Jan 17, 2012 - 01:54 AM GMT

By: PhilStockWorld

Economics

Best Financial Markets Analysis ArticleCourtesy 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.

- Phil

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www.philstockworld.com

Philip R. Davis is a founder of Phil's Stock World (www.philstockworld.com), a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders. Mr. Davis is a serial entrepreneur, having founded software company Accu-Title, a real estate title insurance software solution, and is also the President of the Delphi Consulting Corp., an M&A consulting firm that helps large and small companies obtain funding and close deals. He was also the founder of Accu-Search, a property data corporation that was sold to DataTrace in 2004 and Personality Plus, a precursor to eHarmony.com. Phil was a former editor of a UMass/Amherst humor magazine and it shows in his writing -- which is filled with colorful commentary along with very specific ideas on stock option purchases (Phil rarely holds actual stocks). Visit: Phil's Stock World (www.philstockworld.com)

© 2012 Copyright  PhilStockWorld - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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