NCPA - National Center for Policy Analysis

Growth Rates Leave Forecasters Scrambling

February 4, 1999

The booming U.S. economy is playing tricks on economic forecasters. As soon as they predict a slowdown, the government releases figures that point to higher growth ahead.

While there is still a consensus that the economy will slow sometime this year, the timing of the slowdown is being pushed further into the future, observers report.

  • International Strategy & Investment, an economic consulting firm, raised its forecast of growth in first quarter gross domestic product by two full percentage points since early January and now expects GDP to rise at an annual rate of 4 percent in the first quarter and 3.4 percent in the first half.
  • Brown Brothers Harriman & Co. economists have boosted initial expectations of 2.1 percent growth in the current quarter to 3 percent, adding that they hear "less talk of a recession in 1999."
  • Merrill Lynch has raised its first half GDP forecast from 2 percent to 3.1 percent.
  • A Wall Street Journal survey of 54 economists taken only a month ago pointed to first quarter growth of just 2.1 percent -- but most revised forecasts hover around the 3 percent mark.

Experts say that factors propelling the higher expected growth include warm December weather that sustained the housing and retail sectors, zooming auto sales, and even exports that have been surprisingly heavy lately. The ISI group also notes that tax refunds are reaching consumers more quickly -- due in part to electronic filing.

Source: Tristan Mabry, "Waves of Growth Leave Economists at Sea," Wall Street Journal, February 4, 1999.


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