The Wall Street Journal’s October prediction survey is out. The average forecast is no recession (no negative growth in the second quarter). It is also much higher than three months ago.
First, this is where forecasts are compared to three months ago.
figure 1: GDP as of third release in Q1 2023 (bold green), WSJ July average forecast (light green), GDP as of third release/full revision in Q2 2023 (bold bold) ), WSJ October Men Forecast (sky blue), all in logarithmic form, Q4 2022=0. Source: BEA via FRED, ALFRED, Wall Street Journal (various) and author’s calculations.
The rise in levels was partly due to GDP being higher than forecast for the second quarter. However, GDP growth in the third and fourth quarters is also expected to be about 1 percentage point (annual rate) higher than three months ago, while the growth rate in the first quarter of 2024 is about the same (0.36 percentage points). The forecast growth rate for the second quarter of 2024 has roughly halved – from a SAAR of 1.06 percentage points to 0.56 percentage points.
This is not to say that no one predicts a recession. Figure 2 depicts the average growth rate and the high/low range after 20% pruning. While the averages were all positive, the median (S&P Global Ratings’ Panday) grew -1% in Q4 2023 and 0% in Q1 2024 (SAAR).
figure 2: GDP (bold black), WSJ October survey average (sky blue), 20% high/low forecast (light gray line), Atlanta Fed GDPNow as of October 17 (blue square), All units are seasonally adjusted (SAAR) billions for 2017. Source: BEA 2023Q2 Third Release/Full Revision, The Wall Street Journal (October survey), and author’s calculations.
GDPNow, using data through the 17th, showed that growth in the third quarter was higher than the seventh-highest growth rate (out of 65 respondents), so the economy appears to be doing better than respondents expected in early October.
ScotiaBank’s Jonathan Holt predicts back-to-back quarters of growth in the first to second quarters of 2024. Generally speaking, most negative growth quarters are from the fourth quarter of 2023 to the second quarter of 2024. So while less than half of respondents currently predict a recession next year (48%, to be specific), some are still empirically predicting a recession (as measured by the GDP indicator).
