WSJ Economists Survey

The latest Wall Street Journal forecasting survey of economists is out (in the free section of the WSJ). Some of the survey respondents’ answers might surprise you:


As the WSJ chart shows, more often than not, economists as a group have underestimated inflation.

19% of economists said inflation poses the biggest risk to the
42% said inflation poses a moderate risk
31% said it was a
minor risk.
8% said it poses no risk at all.


Dismal? Hardly. In addition to their chipper view of inflation, as a group, Economists consistently overestimated GDP.


A similar pollyannaish bias: Most of the group underestimated Unemployment, and at the same over-estimated NFP job creation.

Economists are divided on whether commodity prices are at a peak:  51% said “yes,” 49% said “no.”

Here are the probability forecasts for "A Recession will occur over the next 12 months:"
2007  27.1%
2008  42.1%
2009  70.9%


U.S. Economy Hasn’t Hit Bottom, Survey Says
WSJ, April 10, 2008


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What's been said:

Discussions found on the web:
  1. Daniel Halvarsson commented on Apr 11

    It’s remarkable that 39 % of economist believe that inflation is a miner risk, or no risk at all. This shows just how ignorant many people are to the vicious effects of inflation.

    Of all economic concepts, inflation is probably one of the most misunderstood. If one only look at price inflation or core price inflation, it is hard to see that current levels of CPI is a threat to the economy, especially if one look at historic high levels of CPI, as in the 70’s.

    To gauge the real risk of inflation one has to look at monetary inflation, without which, CPI inflation would be pretty much non-existent.

    In reality, monetary inflation can be at significantly high levels at the same time consumer price inflation is low. Irrespective of CPI, monetary inflation does result in the business cycle as interest rates are held at artificially low levels.

    By only looking at the obvious, or at “what is seen”, ie price inflation, focus from the real problem ie. monetary infaltion is seldom accounted for.

  2. Michael Donnelly commented on Apr 11

    Check out the average GDP growth they expect for 2008. 1.1% GDP, oh please. This is exactly like BR other post.

    From the folks that never saw it coming, they are now certain it will be very mild.

  3. Ben commented on Apr 11

    I’m not surprised by the GE’s result but I’m surprised by the market’s reaction, the market should go up despite the bad news, it’s been nearly 30 minutes of trading already!


  4. Karen commented on Apr 11


    “GE disappointed and has gapped down over 11% pre-market. Honestly, what did you think would happen, continued, super, hyper growth in the midst of a GLOBAL credit crunch?”

    Ben Bittroff, The Financial Ninja

  5. Vermont Trader commented on Apr 11

    You can’t spin this one. This is GE’s worst quarter in 15 years.

    GE is first and foremost a financial company and it is as much of a black box as Citigroup or Goldman but weakness was not just in finance.

    Ultimately, nothing matters as much as earnings.

  6. David Price commented on Apr 11

    Hi Barry, We all know the redefinition of CPI by the government has eliminated inflation. We also know the two biggest issues going forward are Social Security and Medicare costs. Both are based on age. I fully expect our government to redefine age at some point. (Ex. 450 days on planet earth equals one year!) That could save us financially going forward.

  7. Dee Leverage commented on Apr 11

    Don’t be surprised by the GE reaction…its as if someone turned a lightswitch off on market cheerleading for at least a day. They brought on Mike Holland for damage control to no use. The key takeaway here is the same one when the Bear CEO appeared right before that blowup…you can’t trust that any of these companies won’t hand you a sudden, nasty surprise. The CNBC anchors sound a bit betrayed.

  8. ferd mertz commented on Apr 11

    well, to use taleb’s phrase from the black swan, these guys are from mediocristan. lately, i have been thinking about how ridiculous financial market outcomes are accepted as reasonable on the upside, while those on the inevitable backside are regarded with disbelief.

  9. bluestatedon commented on Apr 11

    Strange… Frontier declares bankruptcy today, Linens & Things declares BK next week, and GE’s earnings are “unexpectedly” in the dumper… judging from the market’s reaction over the last couple of months to a relentless hammering of lousy economic data, today’s news ought to have been accompanied by solid gains in the market this morning. Time for another rumor of the Fed coming to the rescue in some way, I guess.

  10. Pat G. commented on Apr 11

    Immelt was on just a couple of weeks ago talking about how GE was doing fine. Most of the economist’s and analyst’s have been telling us that the economy and markets will be fine in the second part of this year. The economic numbers that the public get are either skewed, spun or just fabricated. These people are either totally out of touch with reality, incompetent or distorting the facts to keep the game going. Sold to you.

  11. molten_tofu commented on Apr 11

    The sample the WSJ polled of “economists” seems completely misleading. If they’d bothered to poll any economists who do NOT receive their paychecks directly from the financial sector, like perhaps economists at universities, they would discover what I have in my department: everybody talking about the recession/debt crisis like it started a while ago and that we’re no where near the bottom of the rabbit hole.

  12. MitchN commented on Apr 11

    Holland was a bumbling, hysterical mess on the call — come to think of it, sounded as if he was scared…

  13. MarkM commented on Apr 11


    If you are a 60/40 balanced fund manager in this environment, where do you put the fixed income portion of your portfolio if it is to have the desired effect in cushioning any equity turbulence? I have been pondering this for days without answer.

  14. Francois commented on Apr 11

    “lately, i have been thinking about how ridiculous financial market outcomes are accepted as reasonable on the upside, while those on the inevitable backside are regarded with disbelief.”

    It is almost inevitable that downside would be regarded with disbelief, because for the ordinary investor, there’s almost no way to profit from it.

    You can’t short or buy put options in a 401k. Hell, you can’t even go in cash in a timely manner. (Great way for Wall Street to receive a guaranteed annuity from the working stiff, n’est-ce pas?) You must sign forms and forms if you want to trade options in an IRA, and every “expert” (cough!) talking on the airwaves almost NEVER mentioned anything about how to trade the downside. They even push the gall to tell you to “stay the course with a long-term perspective”. Of course, they never bothered to define “long-term” which can be very long as per John Mauldin, who wrote a great piece on this problem several years ago. (I’ll post the reference when I get it.) Furthermore, it is an approach that produces mediocre returns when compared to simple trading on the upside and selling/stay in cash on the downside.

    I don’t have the numbers available right now, (where’s the important stuff when one needs it…grrr!) but Bill Fleckenstein wrote a piece about that a couple of years ago on Moneycentral. It was an eye-opener.

    So, disbelief is the resultant behavioral response to the downside. There’s a good reason for that. Disbelief has the tremendous advantage to strongly suggest that the situation is a violation of the natural order of things (upside) which will, of course, get back on track soon.

    CNBC et al. have no incentive to rock the boat and tell people that they, too, should demand and get the ability to trade both sides of the markets. This is the province of the “professionals”, and everyone else is too dumb to do that.

    In the meantime, suckers get sucked.

  15. Ben commented on Apr 11

    Fed will rescue. Indeed indeed!

  16. Robert- commented on Apr 11

    42% said inflation poses a moderate risk?

    “My” list of products that have gone up more than my 3% yearly raise.

    Gas, milk, bread, ink cartridges, eggs, butter, advertising costs, beans, potatoes, coffee, hamburger, chips, macaroni, insurance, cheese, chicken, popcorn, paper towels, credit card interest rate, soda, tires, nuts, deodorant, laundry soap, olive oil, cable, mushrooms, beef roast, socks, pears, crackers, copy paper, lettuce, razor blades, bacon, rice, toothpaste, vitamins, fish, orange juice, long sleeve shirts, pasta, ice cream, bottled water, vehicle service hourly rate, cereal, light bulbs, granola bars…

    List of products that have not increased more than my 3% yearly raise.

    pickles, monthly cell phone charges, stamps, 10 pack snickers bar, restaurant tips.

    If this keeps up I’ll be living off pickles and snickers until the economy turns around.


  17. Michael Shepherd commented on Apr 14

    Well, of course, there is more to be gained by anyone and everyone, including economists, by optimistic.


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