How Much Were GDP Forecasts Revised Down by Russia’s Invasion?

The Russian invasion probably explains the bulk of the downward revisions in the WSJ’s consensus.

Figure 1: GDP in bn. Ch.2012$ SAAR (black), mean forecast from WSJ October 2021 survey (green), from WSJ January 2022 survey (blue), from WSJ April 2022 survey (red), and potential GDP from CBO (gray). Source: BEA, WSJ (various issues), CBO (July 2021), and author’s calculations.

2022 Q4/Q4 growth was revised from 3.3% in the January survey to 2.57% in the April.

If one believes the CBO’s estimate of potential GDP, then the economy’s output gap is still negative, and has some way to go before hitting full employment. The observed inflation is then interpreted as cost-push, rather than demand-pull (to use admittedly old fashioned language).

Another piece of evidence consistent with this view is the fact that while inflation expectations moved up in late January and early February, they weren’t large movements (as far as can be seen in typical surveys). That means that it’s the disruptions associated with the Russian invasion (oil prices, commodity prices, economic and economic policy uncertainty) that likely induced the downward revisions in expectations.

Below is the high and low forecasts (20% trimmed on 2022 q4/q4).

Figure 1: GDP in bn. Ch.2012$ SAAR (black), mean forecast from WSJ April 2022 survey (red), 20% trimmed high for 2022 Q4/Q4 (blue) and low (green), and potential GDP from CBO (gray). Source: BEA, WSJ (April survey), CBO (July 2021), and author’s calculations.

Using the optimistic forecast from AC Cutts, output won’t even hit potential GDP until this quarter (Q2).

Note that the recession forecasts we’ve been hearing about are for 2023. 2023 Q4/Q4 forecast mean growth is 2.18% — considerably above the 0.7% forecast by Deutsche Bank that incorporates the late 2023 recession.


30 thoughts on “How Much Were GDP Forecasts Revised Down by Russia’s Invasion?

  1. pgl

    “If one believes the CBO’s estimate of potential GDP, then the economy’s output gap is still negative, and has some way to go before hitting full employment. The observed inflation is then interpreted as cost-push, rather than demand-pull (to use admittedly old fashioned language).”

    It seems that the Usual Suspects have dwindled to chirping from the Putin poodles. These chirping poodles have insisted the only plausible explanation for inflation is excess aggregate demand. Of course their chirping does not use this language as these poodles have never learned even freshman macroeconomics.

    1. Moses Herzog

      What frightens me is he might singlehandedly drive IHOP out of business using his CAVPAC expense account for the $5.99 all you can eat pancakes. What’s the bulk rate on pancake batter??

  2. Moses Herzog

    Amy Cutts is definitely a glass half full type person. Possibly Mrs. Cutts is the type idiot who would see Russian troops in Belarus, lined up all along the north border of Ukraine and tell us they are just doing “exercises”.
    Barkley Rosser
    February 14, 2022 at 9:18 am
    “I have just heard from my wife that in Moscow it is being teported that Putin has announced the end of the “successful” exercises in Belarus and that troops will be withdrawn. I suspect a deal was cut on Saturday in the Biden/Putin phone call in which it was agreed that the US advisers in Ukraine would be withdrawn, which is happening right now. Russian media had gone on and on about US troops supposedly being in Ukraine and threatening an invasion.

    This may be over. Helps that they are now providing wall to wall coverage of the Winter Olympics, where the Russians are doing quite well.”

    Thank God Barkley’s secret insiders in Russia let us know mid-February about how Russia doing well in the Olympics would save Ukraine from war. For an abbreviated time frame I really thought Ukraine was in trouble.

      1. Moses Herzog

        Are you telling me I should have used the comment where Barkley was a tad more definitive on the potential event of Putin’s invasion?? As a favor to you, I’ll skip it.

        Dr. Cutts may be a very solid, dutiful, and gracious person, and no doubt more intelligent than me. But….. do you think when someone goes several quarters (at least 3 total now??) with the most optimistic GDP forecast in WSJ that whatever model she is using, she might take a half day to “reevaluate”?? You know I’m not the best at computing large numbers, but I’d be willing to wager if you isolated Dr. Cutt’s quarterly forecasts verses the median forecast over the last say 3 years, you’d be bordering upon a laugh-riot.

    1. Barkley Rosser


      So I accurately reported what in fact Putin was publicly saying to the Russian public. He was lying as it turned out. But among those who believed him were President Zelenskyy of Ukraine as well as apparently a lot of the Russian troops that were engaging in those exercises in Belarus. This has been noted numerous times here, but you somehow think this is some big embarrassment for me that you love to highlight with your patented idiotic emboldenings. Everyone is very impressed, I am sure.

      1. Moses Herzog

        Junior, repeat after me: “I was wrong”. OK, try it once more. Type/Speak “I was wrong”. There, see?? You’re still breathing, yes?? However much I wish it would happen, you won’t be trapped in wooden objects for eternity like Josie Packard.

        In our next therapy session you’ll progress to “I was wrong about multiple things”.

      2. Barkley Rosser


        Just to emphasize more what went down here, I was fully aware that Putin might do a full-scale invasion and said so on numerous occasions, even if one time I said it looked that no it would not happen. I knew I was going against US intel and David Ignatius in doubting Putin would fully invade. But in fact the crucial reason I doubted it was that Zelenskyy and others in Ukraine doubted it. There has been a long history of US intel saying things, such as Saddam had WMDs he did not, that were disputed by people on the ground. I have long had strong respect for views of people on the ground over those sitting far away in some intel HQ. But, in this case, Zelenskyy and the people on the ground were weong, while US intel was right.

        But, let us all keep it in mind that when you denounce me as supposedly being “asinibe” or “very dumb” for thinking this, youi are also denouncing Uktainian President Zelenskyy as also being those things. As it was, you stupidly supported the US move of its embassy out of Kyiv, based on what proved to be a mistaken US intel forecast that Kyiv would rapidly fall to the Russian invasion. On that one, I was right to agree with Zelenskyy that eould not happen.

        You were also wrong about quite a few other things on this, in some cases without at shred of reason or anybody else out there to support your wrongness. Probably the most blatant and outright nauseating was your repeated claims that Ekho Moskvy was not the leading independent radio station in Russia, based on your inaccurate reporting about its ownership. There has been quite a bit more. But I shall leave here with you accusing President Zelensyy of being “asinine” and “very dumb,” which you did, even if you were too dumb to realize you were doing so yet again.

        1. AndrewG

          “But in fact the crucial reason I doubted it was that Zelenskyy and others in Ukraine doubted it.”

          I mean, Zelenskyy was in fact being very dumb. His country was surrounded by almost 200,000 troops while he was publicly discrediting his ally’s very credible assessment that those 200,000 troops weren’t actually there for “joint exercises.” It’s not like Russia hadn’t invaded before. It’s not like Russia hasn’t lied about things like this before.

          And this is nothing like WMD in Iraq. WMD were entirely made up by the US and UK governments in order to justify a war. The “intelligence” was claims made by a single unreliable asset. The nearly 200,000 Russian and Belarussian troops were very much right there, right at the border for all to see, and the Russians had invaded just a few years before.

          And it is entirely amazing that Zelenskyy has become the leader he is in just a few short weeks. Nothing about his behavior before the invasion inspired any confidence.

  3. ltr


    Senior Vice President & Chief Economist

    Amy Crews Cutts joined Equifax as Chief Economist in March, 2011. A recognized industry expert, Cutts brings to her role over 23 years of economic analysis and policy development experience….

    Prior to joining Freddie Mac in 1997, Cutts was Assistant Professor of Economics and Senior Researcher in the Maxwell School for Citizenship and Public Affairs at Syracuse University, where she did research on housing policy, income distribution and poverty. Cutts has also taught in the McDonough School of Business at Georgetown University, the Institute for Policy Studies at the Johns Hopkins University, and the University of Virginia….

    Cutts holds a Master’s and PhD in Economics from the University of Virginia and a Bachelor’s degree in Applied Mathematics from Trinity University in San Antonio, TX. In 2015 she became a Certified Business EconomistTM, a distinction of professional achievement from the National Association for Business Economics.

    1. ltr

      Possibly —- —– is the type idiot who would see…
      Possibly —- —– is the type idiot who would see…
      Possibly —- —– is the type idiot who would see…

      [ Intolerable prejudice. ]

      1. Moses Herzog

        See, you got me to chuckle today in spite of myself. And people here say you are a bad guy…… ??

        I need you to put your Putin cheerleader pompoms down for about 3 seconds “ltr”. You forget “ltr” I spent 7 years in northeast China, some of that in public restaurants watching Chinese TV and getting the “gist” of the message. I know mainland Chinese have made a lifetime hobby of the victimization mentality, “Boohoo, boohoo, boohoohoohoo, the evil Laowai gave us ALL our problems” BORING. DRAB. PREDICTABLE. I am really quite bored with the whole thing. If that useless tact on life encourages the better apple’s of China’s tree to drop over to America, it’s all the more advantageous to me. So just keep doing it. Continue on, carry on. Poor poor you, the sad soul. Put the Mao image on your rear-view mirror. Invite laughter towards the mainland. If I need to watch wasted energy I’ll watch a toy poodle chase its tail.

        1. Barkley Rosser


          You are the only person here would say that ltr might be a “bad guy.” All the rest of us know that ltr is a woman. But we know that you have a serious problem dealing with or understanding women, with your weird and sick insistence that ltr is a “guy” being yet another manifestation of that.

          OTOH, I am unable to spot anybody having said on this thread what she is whining about.

  4. macroduck

    The CBO estimate of potential output is probably as good as any, and it would be unreasonable to expect the CBO to quickly adjust its estimate in response to shocks along the way. We are, however, dealing with two supply shocks, three if you count tariffs on China. At this point, the CBO estimate may be optimistic. Labor force participation doesn’t look stable over time and it has a fair distance to go to prove the CBO right.

    1. pgl

      Back during the 2016 flare up over Gerald Friedman’s pathetic excuse for a macroeconomic analysis of Senator Sanders interesting fiscal policy proposals, a lot of us was saying CBO was likely underestimating potential output by say 5% but certainly not by 20%. Of course estimating potential output is a difficult exercise.

  5. macroduck

    Small business wage setting tends to lead the overall labor market. Planned and actual compensation increases are both very high in the latest (March) survey:

    The latest NFIB survey shows hiring plans still strong, but down sharply from earlier this year. That suggests slower hiring ahead, but nothing like recessionary labor market conditions.

    This does look like a situation in which workers will continue to extract wage gains from employers, though perhaps not as skewed to low-wage workers as has been the case so far. The biggest complaint from small firms is no longer a shortage of workers. It is now a shortage of qualified workers. That suggests a shift in compensation gains toward the middle of the income scale as firms try to take qualified workers away from each other.

    These are circumstances in which firms with strong financials can out compete weaker firms for workers, a factor which induces increased market concentration. Access to credit is also a factor which effects market concentration. In January, loan officers told the Fed they had eased lending terms in every major category of loan:

    Can’t wait to see if that’s still true in the April edition.

  6. rsm

    How can a single presumably rational agent destroy so much production and create inflation expectations worldwide that are becoming entrenched psychologically, despite the bland hand-waving assurances based on just-so stories told by daydreaming economists?

    How can one individual go against all of economics by deliberately destroying allocative efficiency?

    Is the supply shock due to Russia’s invasion entirely psychological, not physical?

    Why doesn’t that make all prices arbitrary?

    1. Barkley Rosser


      You are such a screwball crackpot it is not quite clear whom you are talking about here. But if it is V.V. Putin, well, if somebody actively destroys production facilities and blocks transportation of goods as Putin is doing with his invasion of Ukraine, then the supply shock is real and physical and not just “psychological,” much less some piece of evidence that “prices are arbitrary,” one of the stupider lines you like to repeat here out of a set of such stupidities.


      Or maybe there is no supply shock. March’s inflation numbers were bogus overhead wise. Some pullback is a must for future numbers to work.

  7. ltr

    April 18, 2022

    China’s GDP expands 4.8% in Q1 despite COVID-19 disruptions

    China’s gross domestic product (GDP) expanded 4.8 percent year on year in the first quarter (Q1) of 2022, despite disruptions caused by the resurgence of COVID-19 cases and uncertainties in the international environment, the National Bureau of Statistics (NBS) said on Monday.

    The figure beats the forecasts of 4.4 percent and 4.3 percent by Reuters and Bloomberg economists, respectively.

    The quarterly result is supported by a strong January-February economic recovery. Retail sales grew by 6.7 percent, while fixed-asset investment rose by 12.2 percent during the period.

    Quarterly growth slowed from 1.6 percent in Q4 of 2021 to 1.3 percent.

    China’s per capita disposable income came in at 10,345 yuan ($1,623) in Q1, a nominal increase of 6.3 percent year on year, NBS data showed.

    Retail sales slow

    Retail sales slumped by 3.5 percent in March, weighing the Q1 retail sales growth down to 3.3 percent.

    The retail sales of commodities increased 3.6 percent, and revenue from catering was up 0.5 percent year on year in Q1.

    “The main drags of the economy were weak consumption and property investment,” said Wang Dan, a chief economist at Hang Seng Bank, pointing to the fast-growing e-commerce sector.

    Online retail sales of physical goods rose 8.8 percent in Q1, accounting for 23.2 percent of the total retail sales, data showed.

    Investment in real estate development edged up 0.7 percent in the first quarter. However, the pace slowed for the 12th consecutive month.

    Manufacturing and investment

    Industrial output went up 6.5 percent year on year in Q1. It rose 5 percent in March, compared with a 7.5-percent increase in the first two months of the year.

    The official manufacturing Purchasing Managers’ Index (PMI) dropped to 49.5 in March.

    China’s fixed-asset investment rose 9.3 percent year on year in the first three months of 2022, with manufacturing investment surging 15.6 percent, surpassing the pre-COVID-19 level.

    Policies to strengthen supply chain security and tech innovation supported the strong performance in manufacturing investment, said Wang.

    She expects manufacturing investment to maintain high growth throughout the year. ….


    I see little actual disruption. My guess by May, this will be reversed. Much like the coming upward revisions to gdp/payrolls in 2020-21. Be careful with struggling government data.

    1. Barkley Rosser

      Yeah, Ukrainian wheat and potash and safflower are being sent out of Odesa to world markets with no disruption at all. Those Russian ships apparently blockading the port are just optical illusions, and Ukraine does not really produce much of any of those commodities anyway. Its Black Earth zone is way overrated.

      1. pgl

        Given the fact that Ukraine took out the Russian flag ship, maybe NATO should let some of its ships drift towards the blockade with a gentle suggestion to let the products sail through.

  9. rsm

    Barking-up-the-wrong-tree Rosneft, if capitalism puts in power a man who destroys production, how does capitalism allocate resources efficiently again?

    1. Barkley Rosser


      In case you are unaware of the fact, Putin has moved Russia back towards socialism by re-nationalizing portions of the Russian economy, such as Gazprom, and is threatening to re-nationalize even more of it.

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