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Tuesday, July 05, 2011

Bob Brinker's GDP Growth Forecast

In the July 2011 Marketimer, Bob Brinker projects US GDP will grow by two to three percent in 2011.  He says he is "slightly more conservative than the revised Federal Reserve forecast of 2.7% to 2.9% growth in 2011."
Brinker seems to not understand what "central tendency" for GDP growth means.  "Central Tendency" is  2.7% to 2.9% but the full range of estimates that includes the three highest and three lowest estimates from FOMC board members is 2.5% to 3.0%.   

You can read the exactly what the FOMC forecasts in their June 22, 2011 release at Projections Materials (80 KB PDF)
Brinker's forecast for GDP growth matches that of the International Money Fund (IMF)
In the June 20, 2011 "Concluding Statement of the 2011 Article IV Mission to The United States of America," the IMF makes the following forecast for US GDP growth:
  • 2011: 2.5 percent
  • 2012: 2.7 percent
  • 2013: 2.7 percent
  • 2014: 2.9 percent
  • 2015: 2.9 percent
  • 2016: 2.8 percent
 Also, by claiming he predicts "two to three percent" he'll be "correct" if growth comes in between 1.50% and 3.49% when rounded to a single digit. It is a nice trick perfected by the Wizard of Oz since 1.50% rounds up to 2% and 3.49% rounds down to 3% when you only use one digit of precision!
The Fed and the IMF are far more precise in their predictions since they are not trying to sell "market timing newsletters."

1 comment:

  1. The difference between 2% and 3% (GDP growth) is not 1%. It's 50%! Some forecasting, hey?


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