Thursday, July 12, 2007

Economists Predicting Stronger 2Q Growth

From Bloomberg:

The economy probably expanded at an annual rate of 3.6 percent last quarter, rather than the 3.2 percent rate Global Insight had forecast prior to the trade report, Gault said.

Economists at HSBC Securities USA Inc. and Morgan Stanley in New York were also among those raising their second-quarter estimate.

In a Bloomberg News survey of economists taken July 2 to July 9, economists expected the economy to expand at a 3 percent rate in the second quarter, based on the median of 69 estimates. That compares with a 0.7 percent rate in the first quarter.


There are a few points I would like to address from the above referenced predictions.

1.) Currently, most economists are looking at the first quarter as a brief slowdown in a otherwise long expansion. In other words, there is a consensus that things are getting better.

2.) Let's say the number comes in below expectations. That could create a big problem for people because it would shock the regularly held consensus view.

3.) I would personally be far more comfortable if the median was say 2.3% - 2.5%. Going from .7 to 3% is a big jump whereas moving from .7% to the mid 2% range seems far more possible.