Forecasting GDP: A Look at the WSJ Economists' Collective Crystal Ball

July 19th, 2013

by Doug Short

The last day of July will be a big one for economic news. That's the day we get the Advance Estimate of Q2 GDP -- a rear-view metric, to be sure, but the next release will include a tweaking of the calculation methodology and major historical revisions of the complete series.

The 14th comprehensive revision of the NIPAs, covering the period 1929-2013QI, will be released beginning on July 31, 2013. This year's revision will include several major improvements to the accounts, including expanded capitalization of intellectual property products and a change to accrual accounting for defined benefit pension plans.

For a detailed preview of the changes, see this PDF from the Bureau of Economic Analysis.

Meanwhile the latest GDP forecasts from Wall Street Journal's monthly survey of economists are now available. This month's survey was conducted July 12-16. As a reminder, Q1 Real GDP underwent two downward revisions -- from the Advance Estimate of 2.5% to the Second Estimate of 2.4% and the Third Estimate of 1.8%. Their "guestimates" for Q2 no doubt reflects the weakness in some of the BEA's monthly data for the most recent three months. Back in January, the average forecast for Q2 GDP was of 2.2%.

Here's a snapshot of the full array of opinions in the July survey.

Leaving out the one bizarre outlier, the forecast range is a tad over two percent, with the median (middle), mode (most common) and average forecasts at dead center. has a forecast in the lower range at 1.0%.

Looking Ahead to Q3 and Q4

What do the economists see for Q3 of 2013? Not surprisingly, the forecast spread widens as economists look further into the future, ranging from 1.5% to 4.1%. The Mode is half a percent higher at 2.0%, and the median jumps to 2.3%. Eight of the 47 respondents are looking for 3% or higher.

Flash forward to Q4 and the forecast spread and array are similar to Q3 but bumped up about half a percent.

For a broad historical context for the latest forecasts, here a snapshot of GDP since Uncle Sam began tracking the data quarterly in 1947.

I'll close with one more look at GDP -- the year-over-year percent change, which is perhaps the most disturbing perspective on where we are in the grand scheme of things. Clearly evident is the downward trend and the fact that all but one of the 11 recessions over this timeframe began with the YoY real GDP higher than the last quarter.

The July WSJ survey included the routine question about the probability of a recession in the U.S. in the next 12 months (scale of 0 to 100). The average of the responses was 13%.

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