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The Outlook: WSJ January Survey

Summary:
Upgrades in forecasted growth rates,  largely due to expectations of widespread vaccinations. Figure 1: GDP as reported in 2020Q3 3rd release (black), WSJ April survey (tan), June survey (green), August survey (red), October survey (pink), December survey (blue), January (orange), all in billions Ch.2012$, SAAR, all on log scale. Source: BEA, various vintages, WSJ survey, various vintages, author’s calculations. Note that while the implied projected level of GDP is higher in the January survey relative to December, this is hard to discern in the graph because the large drop and subsequent jump in quarters 2 and 3 dwarf the upgrade. The upwardly revised growth expectations are marked starting in Q2. Figure 2 shows the mean GDP forecast, and the fastest forecasted growth (once again7.8%,

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Upgrades in forecasted growth rates,  largely due to expectations of widespread vaccinations.

Figure 1: GDP as reported in 2020Q3 3rd release (black), WSJ April survey (tan), June survey (green), August survey (red), October survey (pink), December survey (blue), January (orange), all in billions Ch.2012$, SAAR, all on log scale. Source: BEA, various vintages, WSJ survey, various vintages, author’s calculations.

Note that while the implied projected level of GDP is higher in the January survey relative to December, this is hard to discern in the graph because the large drop and subsequent jump in quarters 2 and 3 dwarf the upgrade. The upwardly revised growth expectations are marked starting in Q2.

Figure 2 shows the mean GDP forecast, and the fastest forecasted growth (once again7.8%, once again from James Smith — his forecasting algorithm must be very simple) and the slowest (1.7% from Daniel Bachmann ) over the next four quarters (2020Q4-2021Q3).

Figure 2: GDP as reported in 2020Q3 3rd release (black), WSJ January survey mean (blue), James Smith/Economic Forecaster LLC (red), Daniel Bachmann/ Deloitte (green), Amy Crew Cutts/A.C. Cutts & assoc.  (orange), all in billions Ch.2012$, SAAR, on log scale. Source: BEA, 2020Q3 3rd release, January WSJ survey, and author’s calculations.

Smith predicts a “V” recovery (defined as reverting to the pre-recession level by 2020Q4, or reverting to pre-recession trend). Only 5 out of 67 individuals forecasts a negative period of growth in the next two quarters. Amy Crew Cutts predicts two negative quarters, implying something like a “W” recovery.

The survey was taken between January 8-12.

Additional discussion of the survey results in the WSJ article.

Addendum, 1/15/21:

WSJ January survey in the context of the Trump administration’s current official economic forecast (budget, but not economic, forecast was updated at MSR released in November):

The Outlook: WSJ January Survey

Figure 3: GDP as reported in 2020Q3 3rd release (black), Administration FY2021 forecast (and MSR) (red square), WSJ January survey mean (blue circle), all in billions Ch.2012$, SAAR, on log scale. Source: BEA, 2020Q3 3rd release, OMB, January WSJ survey, and author’s calculations.

Addendum 2, 1/15/21:

WSJ survey mean compared against nowcasts as of today:

Figure 4: GDP as reported in 2020Q3 3rd release (black), WSJ January survey mean (blue), Atlanta Fed (red), NY Fed (green) an IHS-MarkIt (orange), all in billions Ch.2012$, SAAR, on log scale. Source: BEA, 2020Q3 3rd release, January WSJ survey, and Atlanta Fed, NY Fed and IHS MarkIt as of 1/15/2021, and author’s calculations.

Menzie Chinn
He is Professor of Public Affairs and Economics at the University of Wisconsin, Madison

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