Crystal Ball Gazing: Forecasting Q3 GDP 2nd Estimate
Doug Short | Nov 24, 2015 12:49AM ET
The big economic number later today will be the Q3 Second Estimate for GDP. The volatile first two quarters are behind us with their real annualized rates of 0.6% in Q1 and 3.9% in Q2, and the Advance Estimate for Q3 came in at 1.5%. What do economists see in their collective crystal ball for Q3 Second Estimate? 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 Q3 GDP with highlighted values for the median (middle), mean (average) and mode (most frequent). In the latest forecast the median and mode are identical at 1.5% forecast by 27 of the 58 respondents -- that's forty-seven percent of them. The mean was skewed fractionally higher at 1.6%.
Today's release of the Second Estimate for Q3 GDP is, of course, a rear-view mirror look at the economy. The WSJ survey also asks participants to forecast Q4 GDP.
Also of interest is the Atlanta Feds' GDPNow ™ forecasting model, which currently puts Q4 GDP at 2.3% as of November 18th.
As for the WSJ forecasts for 2015 annual GDP, here is the latest, along with the Fed's economic projection for annual GDP.
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Q1 was a temporary contraction; that is certainly the view of the WSJ survey participants. Even the most pessimistic of the lot sees 1.7% for the 2015 year-end print, and the median and mean are forecasting 2.2%, a tad lower than the 2.4% rate for 2014.
h3 GDP: A Long-Term Historical Context/h3For a broad historical context for the latest forecasts, here's 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 -0.9%, 4.6%, 4.3% and 2.1%.
The year-over-year change in the three quarters is a much less attention-grabbing 1.7%, 2.6%, 2.9% and 2.5%. However, when we use the more intuitive percent change from a year ago, we get a long-term perspective on where we are in the grand scheme of things, one the more closely resembles the regression in the chart above.
Later today we'll find out how the latest Q3 forecasts stack up against the BEA's Second Estimate of the real thing.
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