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I just updated my economic forecast, taking into account the new GDP data released by the government last week. Fourth quarter growth came in stronger than I had expected--and everyone has been telling me I'm an optimist!
Here's how the new forecast looks:
The dark blue columns are actual data (though subject to revision by the government), and the light blue columns are my forecast growth rates. The red line is the average growth rate of all the post-World War II recoveries. I've posted information showing that typically, more severe recessions result in stronger economic recoveries. So any forecast underneath that red line is being very conservative.
A key driver of the turnaround in growth is the inventory swing. The latest GDP numbers show a faster recovery of business equipment spending, consistent with reports from high tech companies (such as Cisco's recent sales and earnings report). I had expected more of a post-cash-for-clunkers slump in consumer spending than we actually got, suggested a bit more resilience out there.
Every time I release a forecast that is not totally doom and gloom I get mail from folks reminding me of the deficit, bad policy, high unemployment, etc. I suggest that you extreme pessimists pull data on the long-term growth of the economy, and then argue that the problems we have now are worse than the Civil War, Great Depression, dismantling of the British Empire, World War II, and rise of disco music.
Dr. Bill Conerly
businomics.typepad.com Dr. Bill Conerly is the consultant who connects the dots between the economy and business decisions. He holds a Ph.D. in economics from Duke University and was formerly Senior Vice President at First Interstate Bank.
Dr. Conerly is author of Businomics: From the Headlines to Your Bottomline-How to Profit in Any Economic Cycle, which provides business leaders with a framework for understanding current economic news. He is co-author of Thinking Economics, a multi-media high school economics curriculum used in 24 states.
Dr. Conerly has been interviewed on the News Hour with Jim Lehrer, CNN and local television and radio stations across the country. He has been quoted in the Wall Street Journal, Fortune Magazine, and USA Today.
Dr. Conerly is chairman of the board of Cascade Policy Institute, a member of Oregon Governor Ted Kulongoski's Council of Economic Advisors, and a Senior Fellow at the National Center for Policy Analysis.
Copyright © 2008 Dr. Bill Conerly
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