With talk of a second stimulus package circulating, it’s of interest to see what the current forecasts are indicating about the depth of the recession, as well as the “bounceback”. Jim has presented some of his views here. In this post, I examine the implications of the consensus coming from the March WSJ survey article, which indicates continued deterioration in the outlook, but a recovery beginning in 2009Q3.
Figure 1: Real GDP preliminary (blue), advance (red), February WSJ survey mean forecast (green), March WSJ survey mean forecast (teal), and CBO potential GDP (black), all in log of Ch.2000$. Source: BEA GDP releases, WSJ, CBO, NBER and author’s calculations.
By end-2009, the output gap is predicted to be 7.6% (7.9% in log terms). For those economists who kept on saying this recession was “not too bad”, it is of interest that the output gap – at least as implied by the CBO – is forecasted to rival that at the end of the back to back 1980 and 1981-82 recessions, which ended up at 7.7% (8% in log terms).
In terms of growth rates, the mean forecast indicates that GDP growth will close in on the growth rate of CBO-estimated potential GDP in 2009Q4.
Figure 2: Quarter-on-quarter annualized growth rate of real GDP preliminary (blue), and March WSJ survey mean forecast (teal), and CBO potential GDP (black), all calculated using log differences. Source: BEA GDP releases, WSJ, CBO, NBER and author’s calculations.
As noted in the article, the “recovery date” keeps on getting pushed back…
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