The Wall Street Journal highlights how the consensus forecast has gone from bad to worse, and then even worse since September. An excerpt from the article: Economists in the latest Wall Street Journal forecasting survey, while still mostly projecting growth in the U.S. gross domestic product by the third quarter, largely agree that a "second-half recovery"—a scenario that has been a common feature of most 2009 outlooks—is looking much less likely now than it did a few months ago. Recent data showing just how sharply growth in the U.S. and abroad has declined in the final months of 2008 have cast a deepening shadow over 2009.
As recently as September, economists, on average, thought the U.S. would see annualized GDP growth of 1.2% in the first three months of this year; now, they see a 4.6% decline. Forecasts for the second quarter, the April-June period, have seen a similar shift, from a 1.9% growth forecast to a 1.5% decline, based on the 52 economists who participated in the Journal's February survey.
The average forecast now sees growth in the third quarter at 0.7%, less than half the rate expected last fall. The fourth-quarter picture has also darkened, but just slightly, to growth of 1.9% from the 2.1% seen in November. Five economists see growth declining through the fourth quarter of 2009; they say the current consensus outlook, which says the recession will end in August as GDP growth returns positive, is far too optimistic.
"The consensus is usually late to the party," said Brian Fabbri, chief economist at BNP Paribas, noting that he was one of the few to forecast the current recession two years ago. Now, he is one of the five who sees GDP declining through the end of 2009, along with Joshua Shapiro, chief U.S. economist at forecasting firm MFR Inc., Paul Ashworth of Capital Economics, Swiss Re chief U.S. economist Kurt Karl and retired Vanderbilt University professor J. Dewey Daane. I listened to Global Insight's quarterly webcast today; they have become extremely negative. Back in September 2008, they were forecasting +1.0% growth in 2009, but now they are forecasting -2.5%. My, how things have gone downhill so quickly - that's why "precipitous" has become the adjective du jour.