The Wall Street Journal reports:
WSJ.com - Outlook for U.S. Economic Growth Is Trimmed: Economists sharply reduced their projections of economic growth in the second half of this year, conceding that the outlook is distinctly less rosy than it seemed just a few weeks ago. The consensus forecast... calls for real gross domestic product to grow at an annual rate of 3.8% in the third quarter and 4.1% in the fourth quarter, down from consensus forecasts in late June of 4.4% and 4.2%, respectively....
The lower forecasts still represent a pickup from the actual GDP growth rate of 3.0% in the second quarter that ended in June and should be enough to bring modest improvement to the job market....
That last sentence may not be true: it hinges on productivity growth being less than 3% per year for the rest of this year. That's not something I'd be eager to bet on.
Posted by DeLong at August 13, 2004 08:21 PM | TrackBack | | Other weblogs commenting on this postEven as someone who in the summer of 2003 began to say that stagflation lite (slow growth, increasing inflation, poor job creation, lack of real wage growth) was the logical outcome of bush fiscal policies, and that we would start to see it this summer and definitely see it by early 2005, i was surprised by Q2's slow growth.
But what in heaven's name convinces those who contribute to the "consensus" forecast that growth is going to pick up in Q3 and Q4? What, exactly, is the driver of this growth?
I would, in fact, like to be wrong in my prediction, but without an obvious driver of growth, i'm not sure exactly how i will be....
Posted by: howard on August 13, 2004 08:40 PMAh, yes, the "consensus forecast" -- worth less than the paper it is printed on. I wonder if this is a consensus of the same economists who gazed into their crystal ball and saw a $47bn July US trade deficit (actual: $56bn); or saw 4.1% GDP growth in Japan for the second quarter (actual: 1.7%); or saw 4.7% or higher US GDP growth for the second quarter (actual: 3.0%)?
Huxley said that six monkeys, set to strum unintelligently on typewriters for millions of millions of years, would be bound in time to write all the books in the British Museum. Maybe we should set them to economic forecasts instead; they'd do a better job.
Posted by: General Glut on August 13, 2004 09:13 PMThe trade numbers just reported imply that the 2nd Q real gdp and productivity growth rates will be revised down by a half to a full percentage point.
I have an argument that it is impossible for the consensus to forecast a recession. Recessions occur when the business community over estimates final demand and end up with involuntary inventory accumulation, or as in the last one too much capital investment. Since business plans and production schedules are based on the consensus, for the consensus to forecast a recession it would have to forecast that the consensus expectations are too optimistic and will result in involuntary inventory accumulation. Has anyone ever seen such a forecast or has anyone ever sween a business plan that included involuntary inventory accumulation.
By the way it looks like we are starting to get involuntary inventory accumulation now as the I/S ratio is starting to rise in many economic sectors.
Posted by: spencer on August 14, 2004 08:30 AMHoward and Spencer
I do wish you were being too grumpy, but you are being all too realistic. I agree an am increasingly concerned.
Posted by: anne on August 14, 2004 10:16 AM