The WSJ July Survey of Economists – CPI and GDP Forecasts

The forecasted price level (CPI) has been moved up, as near term expected inflation has increased. Near term GDP growth forecasts upwardly revised, but downside risks remain. Projected output gap small positive at year’s end.

Figure 1: CPI – all urban, quarterly average of monthly data (black bold), CBO projection (red), WSJ July survey mean for end-of-quarter (pink), Michigan survey of consumers for end-of-quarter (blue square), Survey of Professional Forecasters median (blue triangle).  Q2 CPI actual and Michigan survey implied level for June 2022 uses Bloomberg consensus for June 2021 CPI as of 7/12. NBER peak at dashed line. Source: BLS via FRED, WSJ July survey, Michigan survey of consumers, SPF/Philadelphia Fed, Bloomberg as of 7/12, and author’s calculations.

Note the actual CPI data and the CBO and SPF forecast are for quarter averages of monthly data, while the Michigan and Wall Street Journal forecasts are for end-of-quarter.

Showing these in comparable time series:

Figure 2: CPI – all urban, end-of-quarter monthly data (black bold), CBO projection for quarterly average of monthly data (red), WSJ July survey mean for end-of-quarter (pink square), Michigan survey of consumers for end-of-quarter (blue triangle), Brian Wesbury, Robert Stein/First Trust Advisors (green +), Bill Diviney/ABN Amro (blue +).  June CPI actual and Michigan survey implied level for June 2022 uses Bloomberg consensus for June 2021 CPI as of 7/12. NBER peak at dashed line. Source: BLS via FRED, WSJ July survey, Michigan survey of consumers, Bloomberg as of 7/12, and author’s calculations.

The forecasts imply a deceleration in inflation (the index is on a log scale, so a flattening of the slope implies a slowing of growth rate). There is a considerable spread in the expectations of price increase. At the 90% lower bound (for inflation over the next year) is Diviney/ABN Amro, while Wesbury and Stein at First Trust is at the top.

Notice that the Michigan y/y inflation estimate (4% for June) implies a CPI level above the 90% upper bound for CPI from the professional forecasters.

On GDP, the forecast for Q1 GDP growth has been moved up again relative to April (the WSJ moved to quarterly surveys from monthly). The July, April, January and October 2020 forecasts for Q1 were 9.11%, 8.15%, 4.91%, and 3.72% (SAAR), respectively.

Figure 3: GDP as reported (bold black), WSJ October 2020 survey (light green), January 2021 survey (red), April survey (dark blue), July survey (green), all in billions Ch.2012$ SAAR. Source: BEA, 2021Q1 3rd release, WSJ survey of economists, various issues, and author’s calculations.

There’s a fairly wide dispersion of forecasts, particularly on the downside. That is, most respondents agree on rapid growth in the next quarter (Q2) and in the near future, but there’s a view that downside risks to growth remain.

Figure 4: GDP as reported (bold black), July survey (pink), Belinda Roman (gray +), Doug Porter (gray +), at 90% band, all in billions Ch.2012$ SAAR. Source: BEA, 2021Q1 3rd release, WSJ survey of economists, July 2021, and author’s calculations.

Figure 5: GDP as reported (bold black), WSJ July survey (pink), CBO (red), Administration (blue triangle), IMF Article IV for US (green +), FT-IGM survey (light green triangle), all in billions Ch.2012$ SAAR. Source: BEA, 2021Q1 3rd release, WSJ survey of economists, July 2021, IMF, FT-IGM June survey, and author’s calculations.

All of the forecasts save the Administration’s imply a small positive output gap (using the CBO estimate of potential) by year’s end.

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