Forecasting GDP: A Look At The WSJ Economists' Collective Crystal Ball

Today we get the Advance Estimate for Q4 GDP -- a rear-view metric, to be sure, and one that will be subject to two subsequent monthly revisions and annual revision in July. Nevertheless, it will be of considerable interest to economy watchers around the world.

Meanwhile the latest Wall Street Journal monthly survey of economists offers a range of professional views on how GDP fared. This month's survey was conducted January 10-14. As a reminder, Q3 Real GDP underwent two upward revisions -- from the Advance Estimate of 2.8% to the Second Estimate of 3.6% and the Third Estimate of 4.1%. Q4 was somewhat complicated by the government shutdown.

Here's a snapshot of the full array of opinions in the January survey for today's Q4 GDP. I've highlighted the values for the median, average (mean) and mode (most frequent).

 

 

As the visualization above reflects, there is a wide range of opinions Q4 GDP, although the mode is clearly near the upper end of the range.

Looking Ahead to Q1 and Q2 of This Year

Here's the range of forecasts for Q1 2014:

 

 

Here's the range of forecasts for Q2 2014:

 

 

And here is a table showing the high, low, median and average forecasts for Q4 of last year and the four quarters of this year. I've calculated the median and mean to two decimal places to illustrate how closely these two metric aligned through the five-quarter timeframe.

 

 

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

 

Click for a larger image

 

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

 

Click for a larger image

 

Will the Fed Continue to Taper?

The January WSJ survey included a question about expectations that the Fed will reduce its bond-buying in $10 billion increments at coming meetings and finish it by year end.

How did the economists respond?

• 74%, said the Fed will stick to the plan
• 17% said he Fed will accelerate its termination of the program
• 9% thought the Fed will continue the program longer than planned

I'm putting the final touches on this commentary and the business news headline scores a point for majority view of the WSJ economists: The Fed Tapers QE by Another $10 Billion.