Thursday, December 17, 2009

My 2010 U.S. GDP forecast: 0.7% growth

That is much below consensus. (Note: my model has had an average error of 0.5%.)

Some quick reminders: I do not make one single guess or assumption in this forecast. It comes directly from a model which uses leading indicators of the economy. The single one assumption that is implicitly made is that those indicators, which have been very useful at predicting the business cycle in the past, continue to provide information on the future path of the economy. The forecasts which would have been obtained by my (recently developed) model through back-testing are significantly better than most of the forecasts made by the economists polled each quarter by the Wall Street Journal, and notably, would have predicted the past recession. More on my model here, here and here. More on leading indicators here.

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