Projected 2012 and 2013 Economic Growth is Guardedly Optimistic

March 12, 2012

As happens each March, this month’s Economist survey of analyst growth and inflation forecasts extends the forecasting horizon by a another calendar year, this time to 2013.  Uncertainty is very elevated for these long-range estimates, since nearly ten months remain before 2013 even begins and the end of the period is some 22 months away.  Such forecasts are affected by the current direction of the business cycle, upcoming shifts in fiscal policy, but also to a greater extent than in shorter-range projections what analysts perceive to be long-run potential expansion rates.  For the U.S., euro area, Britain, Japan, Canada, Switzerland and Australia, the forecasts of 2013 growth show weaker figures than forecasts unveiled a year ago for the first time of 2012 growth. 

These reduced estimates of future growth are understandable, since 2011 was a more difficult year than had been foreseen.  In March 2010, analysts predicted that the U.S., Euroland, and Japan would expand in 2011 by 2.9%, 1.4% and 1.6%.  Growth in those economies last year instead amounted to 1.7%, 1.4% and negative 0.7%. 

Forecasters are now predicting U.S. GDP will rise 2.2% in 2013, down from a 2012 projection of 3.2% made exactly one year ago.  The 2012 forecast has meanwhile been trimmed by 1.1 percentage points to 2.1%.  Euroland GDP is expected to contract 0.6% this year and rise 0.7% in 2013.  2012 growth a year ago was forecast at +1.7%, so the current year’s revision constitutes a drop of 2.4 percentage points.  For Japan, which was slammed in 2011 by the Sendai earthquake, sub-2% growth of 1.7% is predicted in the current year followed by 1.5% in 2013.  Just prior to the quake, analysts were projecting that Japanese growth of 1.7% in 2011 followed by 2.0% in 2012.

The 2013 consensus growth forecasts for Britain and Switzerland introduced in the most recent survey see GDP climbing by 1.6% in the former and by 1.3% in the latter.  A year ago, analysts were anticipating 2.0% growth in both economies during 2012.  Those estimates have in each case been scaled back to 0.2% according to this month’s survey.

Analysts predict marginally stronger Canadian growth of 2.4% next year compared to the United States.  2.4% represents a 0.4 percentage point downward revision from the 2012 growth of 2.8% that was predicted a year ago.  Now analysts think Canadian GDP will climb just 2.0% in the present year.  As for Australia, analysts a year ago were anticipating that GDP growth would exceed 3% in both 2011 (3.1%) and 2012 (3.7%).  They still see growth landing on the high side of the 3% bar.  The 2012 forecast has been trimmed to 3.0%, but analysts still look for above-3.0% in the new out year of 2013, 3.3% to be exact.

In none of 14 economies for which the latest survey solicited forecasts of 2013 is the consensus a negative growth rate, that is defining a contraction of activity.  However, the 2013 estimates are at zero for both Spain and Italy, two of the euro area’s peripherals.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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