Comments on: Backing and Filling: Forecasts for 4th Quarter GDP Growth Are Revised Upwards http://www.bizzyblog.com/2007/01/14/backing-and-filling-forecasts-for-4th-quarter-and-2007-gdp-growth-are-revised-upwards/ The Business End of the Blogosphere Sat, 11 Oct 2008 11:53:57 +0000 http://wordpress.org/?v=2.5 By: TBlumer http://www.bizzyblog.com/2007/01/14/backing-and-filling-forecasts-for-4th-quarter-and-2007-gdp-growth-are-revised-upwards/#comment-80298 TBlumer Wed, 17 Jan 2007 06:15:17 +0000 http://www.bizzyblog.com/2007/01/14/backing-and-filling-forecasts-for-4th-quarter-and-2007-gdp-growth-are-revised-upwards/#comment-80298 #9 thanks, I would guess that the GDP's general track record of usually getting revised upward by more than at least I would expect on rev 2 and rev 3 would drive you nuts if you didn't wait until the finalized number to update Climbing Limo. #9 thanks, I would guess that the GDP’s general track record of usually getting revised upward by more than at least I would expect on rev 2 and rev 3 would drive you nuts if you didn’t wait until the finalized number to update Climbing Limo.

]]> By: Ironman http://www.bizzyblog.com/2007/01/14/backing-and-filling-forecasts-for-4th-quarter-and-2007-gdp-growth-are-revised-upwards/#comment-80297 Ironman Wed, 17 Jan 2007 06:03:43 +0000 http://www.bizzyblog.com/2007/01/14/backing-and-filling-forecasts-for-4th-quarter-and-2007-gdp-growth-are-revised-upwards/#comment-80297 #8, The method doesn't necessarily forecast trouble 2-3 quarters out (remember, that high prediction for 4Q06 Real GDP was predicted 3 quarters in advance!) It only points where the data says to point! As a result, the method is very data dependent. One of the things I've had to learn to resist doing is to plug the preliminary GDP figures into the calculations as they're released. There is a lot of volatility in the forecast values and until the source data is finalized, the forecast values can vary wildly. On the other hand, The Skeptical Optimist, who created the method, reports that its track record over the past 40 years is such that it provides a better prediction of economic performance 55% of the time (compared to the Bureau of Economic Analysis' method), and since 1993, more than 63% of the time. #8, The method doesn’t necessarily forecast trouble 2-3 quarters out (remember, that high prediction for 4Q06 Real GDP was predicted 3 quarters in advance!) It only points where the data says to point!

As a result, the method is very data dependent. One of the things I’ve had to learn to resist doing is to plug the preliminary GDP figures into the calculations as they’re released. There is a lot of volatility in the forecast values and until the source data is finalized, the forecast values can vary wildly.

On the other hand, The Skeptical Optimist, who created the method, reports that its track record over the past 40 years is such that it provides a better prediction of economic performance 55% of the time (compared to the Bureau of Economic Analysis’ method), and since 1993, more than 63% of the time.

]]> By: TBlumer http://www.bizzyblog.com/2007/01/14/backing-and-filling-forecasts-for-4th-quarter-and-2007-gdp-growth-are-revised-upwards/#comment-79870 TBlumer Tue, 16 Jan 2007 15:49:09 +0000 http://www.bizzyblog.com/2007/01/14/backing-and-filling-forecasts-for-4th-quarter-and-2007-gdp-growth-are-revised-upwards/#comment-79870 #7, my theory is that they're underestimating a bit even now -- but to channel Berman, that's why they release real data. Climbing Limo would always seem to forecast trouble 2-3 quarters out, if I understand your explanation correctly, because it needs new data to justify any projected increase. #7, my theory is that they’re underestimating a bit even now — but to channel Berman, that’s why they release real data.

Climbing Limo would always seem to forecast trouble 2-3 quarters out, if I understand your explanation correctly, because it needs new data to justify any projected increase.

]]> By: Ironman http://www.bizzyblog.com/2007/01/14/backing-and-filling-forecasts-for-4th-quarter-and-2007-gdp-growth-are-revised-upwards/#comment-79783 Ironman Tue, 16 Jan 2007 14:05:03 +0000 http://www.bizzyblog.com/2007/01/14/backing-and-filling-forecasts-for-4th-quarter-and-2007-gdp-growth-are-revised-upwards/#comment-79783 #2, The "Climbing Limo" forecasting method only draws on official GDP data - only revisions to the reported data can change the forecast. For what it's worth, the method tends to forecast a bumpier path forward than what Real GDP actually takes in relatively stable economic conditions, such as we've enjoyed recently. My best guess is that the forecast for Real GDP in 4Q06 is overshooting what the actual results for the quarter will be. This will make it much more likely that if the 2Q07 data comes in as forecast, it will not be as "catastrophic" as it appears compared to the other forecast values. In any case, it'll be two-three months before the 4Q06 data is finalized and we'll know for sure. The first preliminary GDP estimates should be out later this month. #5, Bad news sells better and provides more screen time. #2, The “Climbing Limo” forecasting method only draws on official GDP data - only revisions to the reported data can change the forecast. For what it’s worth, the method tends to forecast a bumpier path forward than what Real GDP actually takes in relatively stable economic conditions, such as we’ve enjoyed recently.

My best guess is that the forecast for Real GDP in 4Q06 is overshooting what the actual results for the quarter will be. This will make it much more likely that if the 2Q07 data comes in as forecast, it will not be as “catastrophic” as it appears compared to the other forecast values.

In any case, it’ll be two-three months before the 4Q06 data is finalized and we’ll know for sure. The first preliminary GDP estimates should be out later this month.

#5, Bad news sells better and provides more screen time.

]]> By: NixGuy.com » The Economy is Good… http://www.bizzyblog.com/2007/01/14/backing-and-filling-forecasts-for-4th-quarter-and-2007-gdp-growth-are-revised-upwards/#comment-79282 NixGuy.com » The Economy is Good… Mon, 15 Jan 2007 19:54:46 +0000 http://www.bizzyblog.com/2007/01/14/backing-and-filling-forecasts-for-4th-quarter-and-2007-gdp-growth-are-revised-upwards/#comment-79282 [...] Surprising to who? We’ve been in a recovery since, oh about 2003 and it’s now 2006. See BizzyBlog, who asks the appropriate questions: [...] […] Surprising to who? We’ve been in a recovery since, oh about 2003 and it’s now 2006. See BizzyBlog, who asks the appropriate questions: […]

]]> By: TBlumer http://www.bizzyblog.com/2007/01/14/backing-and-filling-forecasts-for-4th-quarter-and-2007-gdp-growth-are-revised-upwards/#comment-79207 TBlumer Mon, 15 Jan 2007 18:06:27 +0000 http://www.bizzyblog.com/2007/01/14/backing-and-filling-forecasts-for-4th-quarter-and-2007-gdp-growth-are-revised-upwards/#comment-79207 #4, Points well taken. The frustration here is that some of the data I've cited has been available for weeks, yet the econs weren't changing their outlook. They also got sucked into the media "slowing" meme, which has been suspect for some time. #4, Points well taken. The frustration here is that some of the data I’ve cited has been available for weeks, yet the econs weren’t changing their outlook. They also got sucked into the media “slowing” meme, which has been suspect for some time.

]]> By: Harry Calamari http://www.bizzyblog.com/2007/01/14/backing-and-filling-forecasts-for-4th-quarter-and-2007-gdp-growth-are-revised-upwards/#comment-79174 Harry Calamari Mon, 15 Jan 2007 16:47:21 +0000 http://www.bizzyblog.com/2007/01/14/backing-and-filling-forecasts-for-4th-quarter-and-2007-gdp-growth-are-revised-upwards/#comment-79174 Predicting economic activity is futile. Makets are the collective activity of the individual purchasing decisions of hundreds of millions of people. Given, that nobody knows for sure what and how much they will be buying or investing in 3 months, let alone what 300 million other folks will be doing, you might as well throw darts at numbers to come up with the estitmates. Predicting economic activity is futile. Makets are the collective activity of the individual purchasing decisions of hundreds of millions of people. Given, that nobody knows for sure what and how much they will be buying or investing in 3 months, let alone what 300 million other folks will be doing, you might as well throw darts at numbers to come up with the estitmates.

]]> By: Tracy Coyle http://www.bizzyblog.com/2007/01/14/backing-and-filling-forecasts-for-4th-quarter-and-2007-gdp-growth-are-revised-upwards/#comment-79021 Tracy Coyle Mon, 15 Jan 2007 14:44:07 +0000 http://www.bizzyblog.com/2007/01/14/backing-and-filling-forecasts-for-4th-quarter-and-2007-gdp-growth-are-revised-upwards/#comment-79021 The more the median and mean diverge, the more meaningless is a total. As bad as a good economy is for us, I see no future in predicting anything but. The more the median and mean diverge, the more meaningless is a total. As bad as a good economy is for us, I see no future in predicting anything but.

]]> By: TBlumer http://www.bizzyblog.com/2007/01/14/backing-and-filling-forecasts-for-4th-quarter-and-2007-gdp-growth-are-revised-upwards/#comment-78983 TBlumer Mon, 15 Jan 2007 14:17:51 +0000 http://www.bizzyblog.com/2007/01/14/backing-and-filling-forecasts-for-4th-quarter-and-2007-gdp-growth-are-revised-upwards/#comment-78983 #1, I like and agree with your "translation." Went to your links; hope you're wrong about 2Q07, though you may have updated since. #1, I like and agree with your “translation.” Went to your links; hope you’re wrong about 2Q07, though you may have updated since.

]]> By: Ironman http://www.bizzyblog.com/2007/01/14/backing-and-filling-forecasts-for-4th-quarter-and-2007-gdp-growth-are-revised-upwards/#comment-78969 Ironman Mon, 15 Jan 2007 14:08:46 +0000 http://www.bizzyblog.com/2007/01/14/backing-and-filling-forecasts-for-4th-quarter-and-2007-gdp-growth-are-revised-upwards/#comment-78969 Some of these <a href="http://politicalcalculations.blogspot.com/2006/12/recession-proof-in-2007.html" rel="nofollow">so-called forecasters</a> are so bad at predicting economic results that you really have to wonder why their calls aren't more often taken as a clear indication that the opposite going to happen. More seriously, you really have to question why these analysts are really paid much at all when they say things like: <i>"... data could be distorted by things such as the introduction of the new Windows Vista operating system, shifts in holiday shopping patterns, problems in the auto sector, the plunge in energy prices and unusually warm winter weather." </i> Translation: "we really have no idea at all what will happen, so let's throw up a bunch of garbage and see if anything sticks!" The truth is the economy <a href="http://politicalcalculations.blogspot.com/2006/12/real-gdp-forecast-through-2007-q2.html" rel="nofollow">may be driven a lot more by inertia</a> than anyone really appreciates and it really takes some kind of government action, or some other, more natural, disaster to derail the economy's growth prospects. Some of these so-called forecasters are so bad at predicting economic results that you really have to wonder why their calls aren’t more often taken as a clear indication that the opposite going to happen.

More seriously, you really have to question why these analysts are really paid much at all when they say things like:

“… data could be distorted by things such as the introduction of the new Windows Vista operating system, shifts in holiday shopping patterns, problems in the auto sector, the plunge in energy prices and unusually warm winter weather.”

Translation: “we really have no idea at all what will happen, so let’s throw up a bunch of garbage and see if anything sticks!”

The truth is the economy may be driven a lot more by inertia than anyone really appreciates and it really takes some kind of government action, or some other, more natural, disaster to derail the economy’s growth prospects.

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