Expected GDP Growth in 2010

March 9, 2009

The newest issue of The Economist contains results from its March survey of forecasters and, for the first time, includes projections for 2010.  Three facts stick out.  The first is a dramatic 2.1 percentage point revision of projected Japanese growth in 2009 to minus 5.3% from minus 3.2% that was was the consensus view in the February poll.  I cannot recall such a large revision made for any country between successive months. 

The second important point in the newest Economist survey is the belief that growth will rebound more impressively the United States than in Europe or Japan.  In part, this reflects a perceived relative advantage in U.S. long-term potential growth.  The table below compares projected 2010 growth rates to the mean forecast for 2005-09 made during March of the previous year.  This control group shown in the second row of figures is a proxy for expected long-term growth.  Projected U.S. growth of 1.9% next year is 1.0 percentage point smaller than the average 2.9% growth forecast made nine months before the start of the prior five calendar years.  All the non-U.S. economies shown are expected to experience growth next year that will be further beneath their long-run trends than will be be the case in the United States.  This optimism in the rejuvenating powers of the U.S. economy relative to other economies may explain some of the dollar’s firmer tone.

Mar Poll U.S. Ezone Japan U.K. Cda Austral
2010-f 1.9% 0.7% 0.5% 0.5% 1.7% 1.6%
2005-9 2.9% 2.0% 2.0% 2.4% 3.2% 2.8%


Point number three is the magnitude of the revision to projected 2009 growth over the past twelve months.  Forecasters polled in March 2008 looked for 2009 U.S. growth of 2.2% and now project a decline of 2.2%, an adverse swing of 4.4 percentage points.  The 2009 forecast for Euroland swung from +1.8% to minus 2.4%, a revision of 4.2 percentage points.  In Britain’s case, the forecast swung negatively by 5.1 percentage points form +2.0% to -3.1%, and projected Japanese growth imploded 6.9 percentage points to -5.3% from +1.6%.  The revisions for Canada and Australia were each less than 4 percentage points (ppts): 3.7 ppts to be precise in Canada’s case to minus 1.5% and 3.5 ppts in the Australian instance to -0.3%.  Australian not only has the smallest growth revision but is the only one of the economies show that isn’t expected to record negative growth of at least 1.5% in calendar 2009.

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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