On December 15, John challenged me to go on record with a prediction for 4th quarter and beyond GDP growth. I did and here is what I wrote:
...here are my predictions of the % change in GDP for the next 4 quarters**, starting with 2005 q4: 4.3%, 3.5%, 3.5%, 3.5%.
From today's CNN.com:
The nation's economy grew at its slowest pace in three years in the fourth quarter, according to the government's gross domestic product report Friday, which came in far weaker than economists' forecasts.
The broad measure of the nation's economic activity showed an annual growth rate of 1.1 percent in the fourth quarter, down from the 4.1 percent growth rate in the final reading of third-quarter growth.
Doh!
But hey, I wasn't alone:
Economists surveyed by Briefing.com had forecast a 2.8 percent growth rate in the fourth quarter.
That was the average prediction. Not one economist surveyed predicted a rate as low as 1.1%--the same can be said for the Wall Street Journal panel of expert economists. This after economists were stunned by 4.6% GDP growth in the 3rd quarter. From CNNMoney.com on November 30, 2005:
"[The revised 3rd quarter report is] about as perfect a GDP report as you can get," said John Silvia, chief economist for Wachovia Securities. "We had thought the economy was doing OK, but we didn't think it was doing this well."
The lesson? We have a long way to go in understanding the complex workings of an economy that involves interactions among millions of individual decision makers. But at least we have a good grasp on how the individuals make decisions. They're all rational. Right?
