Expected Economic Growth in 2009

January 12, 2009

The Economist conducts a survey of forecasters each month, soliciting estimates of key economic trends including GDP growth. The table below of the results of the last six surveys illustrates the rapidly deteriorating outlook in the Group of Seven and Australia. The figures depict projected 2009 growth in GDP. The recession was only a month old at the start of 2008, and most economies then were expected to achieve somewhat better growth in 2009 than 2008. The estimates for 2009 made a whole year in advance were in fact mostly reflective of potential GDP and not a fine-tuned depiction of the business cycle. All projected 2009 growth rates in the January 2008 survey were identical to projections given in the December 2007 survey. By mid-summer 2008, analysts had a much better idea that 2009 was shaping into a sub-trend rather than typical year. Although trimmed, assessments of 2009 in August 2008 were still positive in every instance. Jobs in the United States had contracted in each of the first seven months of the year, but opinions varied over whether a technical recession would occur, not to mention the length or depth of such a downturn. The September survey was taken before the seminal event of the crisis, Lehman’s failure that month, and produced results similar to August’s. It is astonishing how rapidly the outlook shifted through the ensuing four surveys and how widely shared that reassessment has been. Incredibly, the forecasts for Euroland and Japan have been identical in each of the last six surveys. U.S. growth in the latest survey is expected to be less negative than growth in Europe or Japan. That’s not unusual, however. Analysts felt the same way about 2009 when queried in January 2008.

  U.S. Ezone Japan U.K. Canada Australia
January -1.2% -1.4% -1.4% -1.7% 0.0% +0.8%
December -1.0% -0.9% -0.9% -1.4% +0.1% +1.1%
November -0.2% -0.1% -0.1% -1.0% +0.5% +1.9%
October +0.6% +0.6% +0.6% +0.1% +14% +2.3%
September +1.3% +0.9% +0.9% +0.6% +2.0% +2.6%
Aug 2008 +1.2% +1.2% +1.2% +1.0% +1.9% +2.7%
Jan 2008 +2.6% +2.0% +1.9% +2.2% +2.5% +3.4%

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