Here’s the outlook for GDP:
figure 1: GDP (black), WSJ average Jan 2023 survey (blue), Oct 2022 (yellow green), GDPNow 1/10/23 (red squares). Sources: BEA 2022Q3 3rd rel, WSJ (various), Atlanta Fed.
Over the past three months, third-quarter GDP growth has topped expectations and growth expectations have accelerated in the fourth quarter. Forecasts made between Jan. 6 and Jan. 10 averaged more than Jan. 10’s GDPNow. That being said, forecasts vary widely.
figure 2: GDP (black), WSJ average Jan 2023 survey (blue), median (red), 20% cut in Q4/Q4 2023 high – Fienup, Hamilton California Lutheran University (tan) , low – Faucher/PNC Financial Services Group (sky blue). Source: BEA 2022Q3 3rd Edition, The Wall Street Journal survey, January.
A recession was not in the mean forecast and a quarter of negative growth was in the median. Of course, as has been discussed on various occasions, two consecutive quarters of negative GDP growth do not equate to a recession.
The Wall Street Journal examines the chances of a recession. Below is a time series.
image 3: Chances of a recession in the next 12 months, from The Wall Street Journal’s January 2023 survey (blue), and. Probability of recession within 12 months from 10-year to 3-month spread (purple). Dates of peak-to-trough recessions as defined by NBER are shaded in gray. Sources: WSJ (January), NBER and authors’ calculations.
For comparison, I’ve included probit’s predicted recession probability for the next 12 months (note the difference from the WSJ survey, which calls for a recession within 12 months.
