Academic journal article The Journal of Business Forecasting Methods & Systems

Consensus Forecasts of Financial Institutions

Academic journal article The Journal of Business Forecasting Methods & Systems

Consensus Forecasts of Financial Institutions

Article excerpt

The recent survey of economic forecasters projects for calendar 1994--the outlook is for subpar economic growth. The projection is for a sluggish consumer sector. Inflation is forecasted to remain about the same as 1993. Both short-term and long-term rates should move up in 1994. Business investment will grow--but do not expect a "boom." Both housing starts and auto sales move sideways.

NEXT YEAR--SLOW GROWTH

This latest survey of financial forecasters covers all four quarters of 1994--the short-term economic future looks good. The average forecast is for constant dollar GDP to grow at an annual rate of 2.5 percent for 1994. The consensus is very strong that the economy will expand slowly in 1994--somewhat below the long-term trend growth of 3.0 percent. Robert H. Vatter, economist for Metropolitan Life Insurance Co., suggests that "the economy continues to struggle along at a subpar pace burdened down by defense cuts, weak overseas markets, and corporate reengineering. While the latter strategy makes sense for an individual business, when pursued concurrently by a large number of firms, the effect on consumer sentiment and spending, on business confidence and investing is most depressing. With fiscal policy no longer a viable option and in fact likely to be a drag in 1994, continued sluggish growth for the economy seems to be on top."

Gary L. Ciminero states, "apparent near-term pain attendant deficit reduction, and ambiguities about health care reform further undercut consumer and employer confidence levels." The economist for Fleet Financial Group feels that, "these emerging risk factors played hob with August consumer confidence, employment, auto sales, and future car production plans." HSBC Group economist, Lacy Hunt, adds, "taxes hurt consumption." The consensus forecast for growth in nominal personal consumption expenditures is rather anemic--about 5.7 percent, on an annual basis. Adjusting for inflation would reduce real spending growth to around 2.0 to 3.0 percent--not a very active consumer sector. The outlook for current dollar personal disposable income is for continued growth--around 5. …

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