Here’s the outlook for GDP:
Figure 1: GDP (black), WSJ mean January 2023 survey (blue), October 2022 (chartreuse), GDPNow 1/10/23 (red square). Source: BEA 2022Q3 3rd rel, WSJ (various), Atlanta Fed.
Over the last three months, GDP rose more than anticipated in Q3, and growth projections for Q4 accelerated. The mean of forecasts made between January 6-10 is exceeded by GDPNow of January 10th. That being said, there is a wide dispersion of forecasts.
Figure 2: GDP (black), WSJ mean January 2023 survey (blue), median (red), 20% trimmed high for 2023 q4/q4 – Fienup, Hamilton California Lutheran University (tan), low – Faucher/PNC Financial Services Group (sky blue). Source: BEA 2022Q3 3rd rel, WSJ January survey.
A recession doesn’t show up in the mean forecast, and a quarter of negative growth shows up in the median. Of course, as discussed on a variety of occasions, two consecutive quarteres of negative GDP growth are not the same as a recession.
The WSJ surveyed recession probabilities. Below is a time series.
Figure 3: Probability of recession within next 12 months, from WSJ January 2023 survey (blue), and . probability of recession in 12 months from probit on 10yr-3mo spread (purple). NBER defined peak-to-trough recession dates shaded gray. Source: WSJ (January), NBER, and author’s calculations.
For comparison, I have included the predicted recession probability for 12 months ahead from a probit (note the difference from the WSJ survey, which asks for recession within 12 months. (More in the article.)
