Saturday, April 27, 2013

Real GDP Expected To Grow 0.5 Percent Over Next Year: Federal Reserve Bank Of Cleveland

Posted by Milton Recht:

From Federal Reserve Bank of Cleveland, "Yield Curve and Predicted GDP Growth, April 2013" April 23, 2013, Covering March 16, 2012–April 19, 2013, by Joseph G. Haubrich and Patricia Waiwood:
Projecting forward using past values of the [3 month - 10 year Treasury interest rate] spread and GDP growth suggests that real GDP will grow at about a 0.5 percent rate over the next year, even with March’s number and up just a bit from February’s 0.4 percent. The strong influence of the recent recession is still leading toward relatively low growth rates. Although the time horizons do not match exactly, the forecast comes in on the more pessimistic side of other predictions, but like them, it does show moderate growth for the year.
Using the yield curve to predict whether or not the economy will be in recession in the future, we estimate that the expected chance of the economy being in a recession next April is 8.1 percent, up a bit from March’s prediction of 5.9 percent, and even above February’s number, which came in at 6.4 percent. Although our approach is somewhat pessimistic as regards the level of growth over the next year, it is quite optimistic about the recovery continuing.
Predicting GDP Growth
We use past values of the yield spread and GDP growth to project what real GDP will be in the future. We typically calculate and post the prediction for real GDP growth one year forward.

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