GDP Predictions: A Poll

[PD]

The most recent GDP number of 1.6 is highly suspect due to a crazy 25% increase in motor vehicle production. Removing this insane growth, GDP comes in at .9.

What are your predictions for future GDP?
Will GDP go negative in the next quarter?
If you do not think it will go negative next quarter, when/if do you think it will go negative?
How many quarters do you think it will be negative?

[PD]

I think we will have negative GDP in the next quarter and that it will be negative for at least three quarters.

[aztecnology]

I think GDP goes negative and remains flat the entire year. I don’t see an uptick until ’08, when a lot of the housing shake up has occured, and the elections are upon us…

[poorgradstudent]

This is almost pure speculation:

Q4 2006: +1.0%
Q1 2007: +0.2%
Q2 2007: slightly negative

I’m guessing it will be negative for 4-5 quarters in all.

[Anonymous]

I predict that Q4 '06 GDP will be negative.

I stand by my depression prediction. Someone is going to have to save $12 trillion to restore low savings levels over '80-'05 to historic levels.

Why? Because someone is going to have to pay for Baby Boomers' retirement and health care. It will be either (1) us working stiffs via higher taxes or (2) the Baby Boomers by continuing work and shoving lots and lots of cash into savings. In either case, the conspicuous consumption of the past decades will be long gone.  With that consumption gone, we'll have a substantial drop in GDP, which is 2/3rds consumer spending.

For those of you familiar with accounting and balance sheets, the national balance sheet for households harbors ugly implications: http://www.federalreserve.gov/releases/z1/current/z1r-5.pdf

Yes, the table indicates $53 trillion of net worth as of Q2 '06. 

But that reflects $20T in household real estate; if 1/3 of that goes 'poof', so does a big chunk of the $5T in equities held by households and $11T held by pension funds on behalf of households.

In the Great Depression, GDP was cut in half over '29 to '32, and didn't regain its nominal '29 level until '40.  And, the speculative excesses that led to the '29 crash didn't seem to be nearly so widespread as such are today.

[4plexowner]

One of the ways that GDP numbers are manipulated is through aircraft sales.

Here is some research I did earlier this year:

Airplanes are expensive items with long lead times to procure / build.

At http://www.boeing.com/commercial/prices/ I learned that a Boeing jet costs between 45.5 million and 253 million dollars to purchase.

Many aircraft that are ordered are never built – the “…civil aircraft sales…” referred to below are zero-down contracts that can be cancelled.

I find all of this interesting from an accounting perspective. Imagine the challenge of manipulating the books for a $12 trillion dollar economy – these aircraft sales are just one of the tools in the toolkit.

The revised durable goods numbers (done with almost all the govt numbers – announce glowing number this month and then revise it down in the footnotes of next mont’s meeting) won’t get much if any media attention. Neither will the cancellation of the aircraft ‘sales’.

Durable goods orders in US beat forecasts
By Christopher Swann in Washington
Published: April 26 2006 17:59 | Last updated: April 26 2006 17:59

US durable goods orders surged by 6.1 per cent in March, more than three times faster than analysts had been expecting.

“The bulk of the rise in durable goods orders was due to a 14 per cent increase in transport orders, with civil aircraft sales climbing 71 per cent. Boeing reported bookings for 112 aircraft in March, up from 25 in February.

Excluding the volatile transport sector, orders rose by 2.8 per cent. Economists had expected a rise of just 1 per cent.”

[socalarm]

quite fascinating. thanks for this thread.

[Author]

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