The US Economic Outlook: March WSJ Survey

Forecasted GDP rises yet again, with considerable dispersion.

Figure 1: GDP actual (bold black), WSJ March survey mean (blue), February (red), January (green), CBO estimate of potential GDP (gray), all in billions Ch.2012$, on log scale. Forecasted levels calculated by cumulating growth rates to latest GDP level reported. Source: BEA (2020Q4 2nd release), WSJ surveys (various), CBO (February 2021), and author’s calculations.

The trajectory of GDP has risen considerably from the February survey, such that it now breaks CBO’s February 2021 estimate of potential GDP in the fourth quarter of 2021 (rather than the 2nd quarter of 2022, as in the February survey). Since the February survey, expectations of the passage of the $1.9 trillion fiscal package have firmed up slightly, but I would expect that most of the upward shift in is due to the increasing confidence that the vaccination process is accelerating — and hence economic prospects improving — under a more competent administration.

Figure 2: GDP actual (bold black), WSJ March survey mean (blue), Christopher Thornberg/UC Riverside Business School (red), Alfred Romero/NC A&T State University (green), CBO estimate of potential GDP (gray), all in billions Ch.2012$, on log scale. Forecasted levels calculated by cumulating growth rates to the latest GDP level reported. Source: BEA (2020Q4 2nd release), WSJ surveys (various), CBO (February 2021), and author’s calculations.

Despite the improvement in the mean forecast, substantial heterogeneity in outlook remain. By 2022Q2, the forecasted output gap is 1.3% (log terms), but the high forecast is for a 5.2% gap and the low a -2.7% gap.

Of course, using alternative measures of potential GDP will give different measures of slack, as described here.

See the WSJ article as well.

Disclosure: None.

How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.