U.S. Economy: Are Opportunities Greater Than Threats?
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Transcript of U.S. Economy: Are Opportunities Greater Than Threats?
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Larry DeBoerPurdue University
August 2011
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AUGUST FORECAST
GDP Unemp- Int. Rate Int. RateGrowth Inflation loyment 3 mo. T 10 yr T
Aug '11 for 2012 2.5% 1.5% 9.0% 0.2% 3.0%
Aug '10 for 2011 2.8% 0.9% 9.5% 0.3% 2.7%Actual 2010 1.6% 3.4% 9.1% 0.04% 3.0%Error 1.2% -2.5% 0.4% 0.2% -0.3%Forecast record since August '91 (20 August forecasts)Mean Error -0.1% 0.0% 0.0% 0.5% 0.4%Mean Absolute Error 1.3% 1.0% 0.6% 0.6% 0.4%
Mean error shows the average of the differences between forecasts and actuals.A big positive error and an equally big negative error would sum to a zero average. Over 20 forecasts, on average I underpredicted growth by 0.2 points.Mean Absolute Error shows the average of the absolute differences between forecasts and actuals. Over 20 forecasts, on average I missed GDP growth by plus or minus 1.2 points.
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Some Macroeconomic Forecasts for 2012
GDP Inflation Unemp- Int. Rate Int. RateForecast & Date Growth (CPI) loyment 3-mo. T 10-yr. T
Congressional 3.1% 1.0% 8.4% 1.1% 3.8%Budget OfficeJanuary 2011http://www.cbo.gov
RSQE 3.1% 1.9% 8.7% 0.2% 3.3%Univ. of Michigan6/16/2011http://www.umich.edu/~rsqe/pages/Forecasts.html
Survey of Professional 2.6% 2.0% 8.6% 0.4% 3.5%ForecastersPhiladelphia Federal Reserve8/12/2011http://www.phil.frb.org/econ/spf/
DeBoer, August 2011 2.5% 1.5% 9.0% 0.2% 3.0%Current, August 2011 1.6% 3.4% 9.1% 0.04% 3.0%
KEY:3-mo. T: Three month Treasury note10-yr. T: Ten year Treasury bondCPI: Consumer Price IndexRSQE: Research Seminar in Quantitative Economics
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Recent Changes in Major GDP Components
Prior Past PastMajor GDP Components 3 years year QuarterI: Business Equipment -2.9% 9.1% 5.7%C: Durable Goods -1.6% 8.0% -4.4%X: Exports 2.6% 7.9% 6.0%M: Imports -2.0% 4.7% 1.3%C: Non-durable Goods -0.1% 2.2% 0.1%I: Business Structures -10.7% 1.7% 8.2%GDP: Gross Domestic Product -0.3% 1.6% 1.3%C: Services 0.0% 1.1% 0.8%G: Federal Defense 5.8% -1.7% 7.3%G: Federal Non-defense 7.4% -2.3% -7.4%G: State and Local -0.8% -2.5% -3.4%I: Residential Structures -17.1% -6.9% 3.8%
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63.7July ‘11
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Recent Changes in Major GDP Components
Prior Past PastMajor GDP Components 3 years year QuarterI: Business Equipment -2.9% 9.1% 5.7%C: Durable Goods -1.6% 8.0% -4.4%X: Exports 2.6% 7.9% 6.0%M: Imports -2.0% 4.7% 1.3%C: Non-durable Goods -0.1% 2.2% 0.1%I: Business Structures -10.7% 1.7% 8.2%GDP: Gross Domestic Product -0.3% 1.6% 1.3%C: Services 0.0% 1.1% 0.8%G: Federal Defense 5.8% -1.7% 7.3%G: Federal Non-defense 7.4% -2.3% -7.4%G: State and Local -0.8% -2.5% -3.4%I: Residential Structures -17.1% -6.9% 3.8%
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Recent Changes in Major GDP Components
Prior Past PastMajor GDP Components 3 years year QuarterI: Business Equipment -2.9% 9.1% 5.7%C: Durable Goods -1.6% 8.0% -4.4%X: Exports 2.6% 7.9% 6.0%M: Imports -2.0% 4.7% 1.3%C: Non-durable Goods -0.1% 2.2% 0.1%I: Business Structures -10.7% 1.7% 8.2%GDP: Gross Domestic Product -0.3% 1.6% 1.3%C: Services 0.0% 1.1% 0.8%G: Federal Defense 5.8% -1.7% 7.3%G: Federal Non-defense 7.4% -2.3% -7.4%G: State and Local -0.8% -2.5% -3.4%I: Residential Structures -17.1% -6.9% 3.8%
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Federal Government Debt as Percent of GDP
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Deficit, $1,294
38%
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Recent Changes in Major GDP Components
Prior Past PastMajor GDP Components 3 years year QuarterI: Business Equipment -2.9% 9.1% 5.7%C: Durable Goods -1.6% 8.0% -4.4%X: Exports 2.6% 7.9% 6.0%M: Imports -2.0% 4.7% 1.3%C: Non-durable Goods -0.1% 2.2% 0.1%I: Business Structures -10.7% 1.7% 8.2%GDP: Gross Domestic Product -0.3% 1.6% 1.3%C: Services 0.0% 1.1% 0.8%G: Federal Defense 5.8% -1.7% 7.3%G: Federal Non-defense 7.4% -2.3% -7.4%G: State and Local -0.8% -2.5% -3.4%I: Residential Structures -17.1% -6.9% 3.8%
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Imports
Trade Balance
Exports
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China Yuan
Euro
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AUGUST FORECAST
GDP Unemp- Int. Rate Int. RateGrowth Inflation loyment 3 mo. T 10 yr T
Aug '11 for 2012 2.5% 1.5% 9.0% 0.2% 3.0%
Aug '10 for 2011 2.8% 0.9% 9.5% 0.3% 2.7%Actual 2010 1.6% 3.4% 9.1% 0.04% 3.0%Error 1.2% -2.5% 0.4% 0.2% -0.3%Forecast record since August '91 (20 August forecasts)Mean Error -0.1% 0.0% 0.0% 0.5% 0.4%Mean Absolute Error 1.3% 1.0% 0.6% 0.6% 0.4%
Mean error shows the average of the differences between forecasts and actuals.A big positive error and an equally big negative error would sum to a zero average. Over 20 forecasts, on average I underpredicted growth by 0.2 points.Mean Absolute Error shows the average of the absolute differences between forecasts and actuals. Over 20 forecasts, on average I missed GDP growth by plus or minus 1.2 points.
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Total
Private
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Core (less food and energy)
All Items
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Real
Nominal
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AUGUST FORECAST
GDP Unemp- Int. Rate Int. RateGrowth Inflation loyment 3 mo. T 10 yr T
Aug '11 for 2012 2.5% 1.5% 9.0% 0.2% 3.0%
Aug '10 for 2011 2.8% 0.9% 9.5% 0.3% 2.7%Actual 2010 1.6% 3.4% 9.1% 0.04% 3.0%Error 1.2% -2.5% 0.4% 0.2% -0.3%Forecast record since August '91 (20 August forecasts)Mean Error -0.1% 0.0% 0.0% 0.5% 0.4%Mean Absolute Error 1.3% 1.0% 0.6% 0.6% 0.4%
Mean error shows the average of the differences between forecasts and actuals.A big positive error and an equally big negative error would sum to a zero average. Over 20 forecasts, on average I underpredicted growth by 0.2 points.Mean Absolute Error shows the average of the absolute differences between forecasts and actuals. Over 20 forecasts, on average I missed GDP growth by plus or minus 1.2 points.
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Ben Bernanke, Fed Chair
“To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels
consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate
at 0 to 1/4 percent. The Committee currently anticipates that economic conditions--including low rates of
resource utilization and a subdued outlook for inflation over the medium
run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
FOMC, August 9, 2011
Voting against the action were: Richard W. Fisher, Narayana Kocherlakota, and Charles I. Plosser . . . .
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Monetary Base
Money Supply
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BAA
AAA
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AUGUST FORECAST
GDP Unemp- Int. Rate Int. RateGrowth Inflation loyment 3 mo. T 10 yr T
Aug '11 for 2012 2.5% 1.5% 9.0% 0.2% 3.0%
Aug '10 for 2011 2.8% 0.9% 9.5% 0.3% 2.7%Actual 2010 1.6% 3.4% 9.1% 0.04% 3.0%Error 1.2% -2.5% 0.4% 0.2% -0.3%Forecast record since August '91 (19 August forecasts)Mean Error -0.1% 0.0% 0.0% 0.5% 0.4%Mean Absolute Error 1.3% 1.0% 0.6% 0.6% 0.4%
Mean error shows the average of the differences between forecasts and actuals.A big positive error and an equally big negative error would sum to a zero average. Over 20 forecasts, on average I underpredicted growth by 0.2 points.Mean Absolute Error shows the average of the absolute differences between forecasts and actuals. Over 20 forecasts, on average I missed GDP growth by plus or minus 1.2 points.