The Administration’s GDP Forecast, Compared

The President’s budget document included a table (S-9) including GDP forecasts (q4/q4). How much of an outlier are these forecasts? I let readers decide.

Figure 1: GDP as reported (black), Administration forecast (red squares), CBO January forecast (blue) and forecast from ARIMA(1,1,1) estimated over post-recession period, with plus/minus one standard error, all in bn.Ch.2012$ SAAR Source: BEA initial 2018Q4 release, President’s budget, CBO Budget and Economic Outlook January 2019, and author’s calculations.

The Administration forecast is noticeably above the CBO’s forecast (conditioned on current law), even for the current year. (And the WSJ February survey consensus is for about 2.2% q4/q4 growth vs. 3.2% from Administration). By end of 2025, one can conclude that the Administration’s forecast is statistically significantly different (at the 66% confidence level) from that drawn from a naive time series model (in this case an ARIMA(1,1,1) on log real GDP estimated over the 2009Q2-2018Q4 period).

The Administration has previously attacked CBO projections. As noted in this post, CBO did underpredict growth over the subsequent two years by an average 0.2 percentage points (over the 1982-12 period), while the Administration overpredicts by about 0.1 ppts. However, the RMSE of CBO’s predictions is typically on par with Blue Chip consensus, and below the Administration’s.



7 thoughts on “The Administration’s GDP Forecast, Compared

  1. pgl

    I have never trusted those naive ARIMA forecasts. Of course the Trumpian forecast is on part with it so hey. Of course we all suspect that the Trumpians did some reverse engineering so as to claim their tax cuts actually raise tax revenues. Supply side magic in action!

  2. Moses Herzog

    Well, 2.2% growth, if that holds into late 2020, puts Orange Excrement on projection to win his 2nd term the way I am scoring it. That gives “VSG” a 0.7% margin of safety on a 1,5% or below that gets the orange mammal into electoral or ballot box problems on a re-election.

    The orange mammal keeps its word though. I think the Mexico fence downpayment is currently being hidden in Stormy Daniels’ bra.

  3. Moses Herzog

    Did I forget to mention what an outstanding student “VSG” was??

    Word has it that donald trump’s grade transcripts are now being hidden in David Pecker’s underwear. Snuggled in cozy with the Pecker. Where donald trump keeps most his secrets, right next to his dear friend Pecker. He would have kept it with his Russian mobster friends until they hid the Moscow mattress video from him.

  4. Moses Herzog

    Is this an independent German move, or is this America strongly nudging Germany into it?? In this case, either way, I think it’s the right decision:

    When the Chinese government chooses to act like a little boy at pre-school insisting that the one pathway to the community toy box is “all his” (South China Sea) then the stakes are too high to trust them with gatekeeper type technology. Sorry (not Sorry!!! ), but the government (not the people, the government) has shown themselves to be amoral too many times.

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