Forecasting Q2 GDP: Gazing Into The Crystal Ball
Doug Short | Jul 28, 2015 01:15AM ET
The big economic number this week will be the Q2 Advance Estimate for GDP on Thursday at 8:30 AM ET.
With the Q1 GDP of -0.2% behind us, what do economists see in their collective crystal ball for Q2 of 2015? Let's take a look at the latest GDP forecasts from the latest Wall Street Journal survey of economists conducted earlier this month.
Here's a snapshot of the full array of WSJ opinions about Q1 GDP with highlighted values for the median (middle), mean (average) and mode (most frequent). In the latest forecast, the median and mean were close cousins, 2.6% and 2.7%, respectively. The slight mean skew is attibutable to those four optimistic forecasts in the 3.8% t0 4.0% range. The mode of 2.5% was constituted by a whopping 25% of the WSJ forecasts.
The Investing.com consensus, which we regularly feature, is for 2.7%. The Briefing.com consensus is for 2.6%, but their own estimate is a morbid 1.3%, which is lower than the most pessimistic WSJ economist.
h3 GDP in 2015/h3Thursday's release of the Advance Estimate for Q2 GDP is, of course, a rear-view mirror look at the economy. The WSJ survey also asks the participants to forecast year-end annual GDP 2015. Here is a snapshot of that forecast range along with the latest Federal Reserve GDP projections.
Also of interest is the Atlanta Feds' GDPNow ™ forecasting model, which currently puts Q2 GDP at 2.4%
As for the WSJ forecasts for 2015 annual GDP, they have a similar range to the Q2 estimates, although slightly lower owing to the first quarter drag.
Q1 was a temporary contraction; that is certainly the view of the WSJ survey participants. Even the most pessimistic of the lot sees 1.4% for the 2015 year-end print, and the median and mean see a return to the 2.3%-2.4% range, pretty much in line with the 2.4% annual GDP for 2014.
h3 GDP: A Long-Term Historical Context/h3
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For a broad historical context for the latest forecasts, here a snapshot of GDP since Uncle Sam began tracking the data quarterly in 1947.
here ). Consider: the four quarters of 2014 GDP using the BEA's preferred method are -2.1%, 4.6%, 5.0% and 2.2%. The year-over-year change in the three quarters is a much less attention-grabbing 1.9%, 2.6%, 2.7% and 2.4%. However, when we use the more intuitive percent change from a year ago, we get a somewhat disturbing long-term perspective on where we are in the grand scheme of things, one the more closely resembles the moving average in the chart above.
On Thursday we'll find out how the Q2 forecasts stack up against the Advance Estimate of the real thing.
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