Reader JohnH is not convinced that the Russian invasion is of any importance to the US economy, according to his comments on it postal. This is the GDP forecast revision from pre-invasion to post-invasion.
figure 1: GDP January 27, 2022 (gray), March 30, 2022 GDP (black), February Professional Forecaster Survey median (teal) and April Wall Street Journal survey average ( red). Sources: BEA (various), Philadelphia Fed, WSJ, and author’s calculations.
It would be better to compare the SPF to the SPF forecast, but the 1Q GDP releases drove large swings in levels. So I compared the February SPF with the April WSJ. In my experience, when the WSJ survey and the SPF are released in the same month, the median/average responses are very similar.
In this interpretation, news of Russia’s expanded invasion/”special military operation” knocked half a percentage point off year-end GDP forecasts. It’s important in my opinion.
What about inflation expectations? A year ahead, inflation expectations rose sharply as the Russian invasion expanded.
figure 2: Year-on-year forward CPI inflation expectations, from Michigan survey (blue), NY Fed median (tan) and Coibion-Gorodnichenko survey of firm inflation expectations (sky blue squares). Source: University of Michigan, from FRED, NY Fed, and SoFIE.
I’d say that inflation expectations rose substantially with the event.
