It may be that economists are wrong so often that their forecasts about growth and the odds for or against future recessions are of little value. Nevertheless, the National Association of Business Economics (NABE) July Outlook Supplement found that almost none of the 50 panelists surveyed forecast a recession in this year or the year to come. They do expect the economy to slow, however. The panel’s prediction was that GDP would rise only 1.6% this year, compared to a June estimate by the same body of 2.5%. That is quite a drop in only a month.
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As the group considered an even worse case, authors of the report wrote:
Notwithstanding the difficult start to the year, opinion is widespread that the economy is on solid footing. More than 90% of panelists believe the probability that the economy will fall into recession in 2014 or 2015 is less than 25%.
The number was even better when the data were sliced another way:
Despite lowering their forecasts for 2014, panel see a low probability of a U.S. recession in 2014 or 2015. Almost 60% of the panelists put the odds at less than 10%, while nearly another third (32.7%) estimate the recession probability at between 10% and 25%. Only about 8% believe the probability is higher than 25%, with just 2% putting the odds at greater than fifty-fifty.
Dissidents have a way of beating the odds. An annual expansion rate of 1.6% is strong enough to bolster the conclusion that with one or two unexpected drags on the economy, the GDP figure could drop to zero. That was illustrated in the first quarter with a drop in GDP blamed primarily on the weather. In future quarters, a spike in oil prices because of trouble in the Middle East, a stagnant housing market, a sharp drop in the stock market or an unexpected end to the creation of new jobs could be enough to take the edge off any expansion.
The NABE will poll its panel again within a few weeks. Maybe at that point, the members will see more drags on the economy and cut their forecast again.
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