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Significant Changes in the Consensus - November 12, 2007

In the United States, next year’s forecasts for a number of growth variables have dropped amid rising concerns of a prolonged slowdown in activity. Despite the “advance” Q3 national accounts showing a 2.6% (y-o-y) acceleration in GDP growth, the housing sector continues to contract. Elsewhere, industry is – to a certain extent – being hit by the shake-out in the financial system. With financing conditions tight, production plans are being scaled back and inventories allowed to build. Forward-looking manufacturing sentiment has dipped recently, and our panel’s 2008 industrial production forecasts have seen a downgrade. Meanwhile, inflation has returned to the spotlight following the Fed’s recent rate cuts. Food and energy costs are pushing up headline inflation, but core PCE prices also rose to 1.8% (q-o-q annualized) in Q3 following a 1.4% increase in the previous quarter. Headline inflation expectations for next year have jumped.

 

Historical Data

Consensus Forecast
Consensus Forecasts for 2008 from Survey of:
 * % change on previous year
2004
2005
2006
2007
Jun.'07
Jul.
Aug.
Sep.
Oct.
Nov.
Gross Domestic Product*
3.6
3.1
2.9
2.1
2.9
2.8
2.6
2.4
2.4
2.3
Industrial Production*
2.5
3.2
4.0
2.1
3.0
3.0
2.8
2.7
2.7
2.5
Consumer Prices*
2.7
3.4
3.2
2.8
2.4
2.4
2.4
2.3
2.3
2.6

In China, growth in the third quarter appears to have eased somewhat after the latest real GDP report showed that activity moderated from 11.9% in the April-June period to 11.5%. Despite the weaker headline growth rate, imbalances in the economy continue to persist. This is illustrated by the soaring trade surplus, strong money supply growth and excess liquidity in the banking system. Last month the authorities raised banks' reserve requirement ratio for the eighth time this year. With global oil prices having risen sharply recently, the risk to the inflation outlook remains on the upside. Most analysts believe that further monetary tightening will take place, and this is expected to take some of the steam out of the economy next year.

 

Historical Data

Consensus Forecast
Consensus Forecasts for 2008 from Survey of:
 * % change on previous year
2004
2005
2006
2007
Jun.'07
Jul.
Aug.
Sep.
Oct.
Nov.
Gross Domestic Product*
10.1
10.4
11.1
11.3
9.8
9.9
10.6
10.6
10.7
10.5
Consumer Prices*
3.9
1.8
1.5
4.4
3.0
3.0
3.5
3.6
3.7
3.8
Trade Balance (US$bn)
32.1
101.9
177.5
264.8
232.3
259.3
273.8
280.0
282.6
291.2




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