The recently released minutes of the June 23-24 FOMC meeting, found here:
http://www.federalreserve.gov/monetarypolicy/fomcminutes20090624.htm
stated the following: “The staff projected that real GDP would decline at a substantially slower rate in the second quarter than it had in the first quarter and then increase in the second half of 2009, though less rapidly than potential output. The staff also revised up its projection for the increase in real GDP in 2010, to a pace above the growth rate of potential GDP. As a consequence, the staff projected that the unemployment rate would rise further in 2009 but would edge down in 2010.” Additionally, GDP for 2009 was forecast (using their term “Central Tendency”) as -1.5% to -1.0%, and for 2010 as 2.1% to 3.3%. For 2011, 3.8% to 4.6% and “Longer Run” 2.5% to 2.7%. The Unemployment Rate is seen forecast as 9.8% to 10.1% in 2009, 9.5% to 9.8% in 2010, and 8.4% to 8.8% in 2011; with the “Longer Run” as 4.8 to 5.0%.
On another note, Nouriel Roubini is quoted at this link:
it says “The U.S. recession will last six more months and be followed by a “shallow” recovery, Nouriel Roubini said.”
Additionally, “This is a great recession that could have ended up in a near depression,” Roubini, the New York University economist who predicted the credit crisis, said on Bloomberg Radio’s “Surveillance.” “We’re not out of the woods.”
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I find Nouriel Roubini’s comments, seen above, to be interesting as he has been seen as perhaps the “gloomiest” among the professional economists. Now, his (as well as RGE Monitor’s) views don’t seem too far from the consensus, albeit still below them.
The Federal Reserve forecast above, as well as Roubini’s comments, seem to further confirm that there is a very widely held, tight (meaning there is little variance) consensus among public and private economists.
As stated previously on this blog, at this link here:
http://www.economicgreenfield.com/a-special-note/
from a fundamental perspective, I don’t think (based upon my analysis) that the economist consensus that the ”worst is behind us” is correct, unfortunately. During periods of economic decline, it is relatively common to have periods of “relief” from decline – then a resumption of further decline. This is what I believe we are experiencing now, both in the economy as well as the stock market rally (which I have previously referred to as a ”bear market rally.”)
Furthermore, from a purely statistical standpoint, I stated this in a July 1 blog post (seen in italics below):
“This conclusion, that “the worst may soon be over” and that recovery will quickly follow, seems to be extremely widely held among forecasters, as documented elsewhere (such as the June 19 post) on this blog.
I find this “widely held” facet to be fascinating in and among itself. Economic forecasts since 2007 have proven very inaccurate, and now we have an overwhelming consensus among public and private forecasters of recovery and slow growth going forward. From a purely statistical standpoint, what are the odds of such an overwhelming consensus proving accurate going forward, given that forecasts of 2007 – early 2009 proved so inaccurate?
Another issue is why is there such a consensus? Are all the forecasters using the same models, or is there such uncertainty that a “safety in numbers” mentality has taken hold?
SPX at 939.54 as this post is written
Copyright 2009 by Ted Kavadas
Recent ECRI Statements
Wednesday, July 15th, 2009In this post I would like to highlight ECRI and some of its recent statements, after which I will make comments.
From a recent (7/14/09) Newsweek story, quoting ECRI, found here:
http://www.businesscycle.com/news/press/1481/
“From our vantage point, every week and every month our call is getting stronger, not weaker, including over the last few weeks,” says Achuthan. “The recession is ending somewhere this summer.”
I found the following phrase on this ECRI site link to be interesting:
http://www.businesscycle.com/about/approach/
“The emphasis is on the development of leading indexes that hold up in spite of structural changes…”
And finally, this is interesting from the ECRI website:
http://www.businesscycle.com/
“In fact, over the last 75 years, growth rate cycle upturns during every recession were followed zero to four months later by the end of the recession itself. No exceptions.”
“Actually, there’s been only one solitary exception in the data we have examined, which go back well over a century. This was the growth rate cycle upturn of 1930-31, which gave way to a renewed downturn. But, when this growth rate cycle upturn was beginning at the end of 1930, USLLI growth was turning back down, warning that the firming in growth would soon be reversed, effectively opening the door to depression. That’s not the case today.”
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My comments: There is a lot I could say regarding my views on ECRI’s methodologies and current views.
For now, I will say that as previously stated on this blog, I believe (and my analysis indicates) that we are in a “new (economic) environment.” Whether ECRI’s methodologies yield the correct interpretation of our current economic environment will of course play out with time. This is something that I plan on watching closely…
As an aside, I’ve been wondering about the following…If a (U.S.) central banker or other main policymaker were to wholeheartedly believe in the methods and long term predictive ability of ECRI’s methodology, wouldn’t it make sense, especially under a very stressful, uncertain economic situation, to try to craft policy in line with that which would promote strong ECRI leading (WLI & USLLI) growth – under the assumption that economic recovery would follow?
SPX at 927.66 as this post is written
Copyright 2009 by Ted Kavadas
Tags: commentary on ECRI, economy
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