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The WSJ April Survey: Accelerating Growth Prospects

Summary:
The survey results are out, and once again, the outlook improves. Figure 1: GDP actual (bold black), WSJ April survey mean (blue), February (red), December (green), October (light blue), CBO estimate of potential GDP (gray), all in billions Ch.2012$, on log scale. Forecasted levels calculated by cumulating growth rates to latest GDP level reported. Source: BEA (2020Q4 3rd release), WSJ surveys (various), CBO (February 2021), and author’s calculations. The implied output gap by 2022Q2 is 1.9%, compared to 1.3% from last month’s survey (discussed here). Despite the improvement in the central tendency of forecasts, there remains wide disagreement. Figure 2: GDP actual (bold black), WSJ April survey mean (blue), Cummins/Nat West Markets (red), Fienup, Hamilton/California Lutheran

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The survey results are out, and once again, the outlook improves.

Figure 1: GDP actual (bold black), WSJ April survey mean (blue), February (red), December (green), October (light blue), CBO estimate of potential GDP (gray), all in billions Ch.2012$, on log scale. Forecasted levels calculated by cumulating growth rates to latest GDP level reported. Source: BEA (2020Q4 3rd release), WSJ surveys (various), CBO (February 2021), and author’s calculations.

The implied output gap by 2022Q2 is 1.9%, compared to 1.3% from last month’s survey (discussed here).

Despite the improvement in the central tendency of forecasts, there remains wide disagreement.

Figure 2: GDP actual (bold black), WSJ April survey mean (blue), Cummins/Nat West Markets (red), Fienup, Hamilton/California Lutheran University (green), CBO estimate of potential GDP (gray), all in billions Ch.2012$, on log scale. Foreacasted levels calculated by cumulating growth rates to latest GDP level reported. Source: BEA (2020Q4 3rd release), WSJ surveys (various), CBO (February 2021), and author’s calculations.

The low forecast implies that an output gap of -1.3% remains by 2022Q2 (the high is 5.1%). In other words, some economists view as plausible the existence of slack in mid-2022 (and it’s possible that even with the high estimates of growth, slack will exist given a high estimate of potential – see this post).

Unsurprisingly, the inflation forecasts have been marked up as well. However, even with 12 month inflation in December 2021 being marked up to 2.58% from 2.48%, the price level will still be below 2016-19 trend.

The WSJ April Survey: Accelerating Growth Prospects

Figure 3: CPI-all (bold black), CPI implied by WSJ April survey (teal squares), and 2016-19 trend (red), all at end of quarter, on log scale. Source: BLS via FRED, WSJ April survey, and author’s calculations.

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

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