Thursday, March 26, 2009

This is bad news

Kevin Page of the PBO has joined David Wolf in forecasting a historic contraction in Q1:

"Mr. Page told the House of Commons finance committee that, based on private-sector forecasts and his own assessments, he expected GDP to contract by about 8.5% in the first quarter of 2009 and by 3.5% in the second quarter." - Globe and Mail
I've only recently begun trying to forecast GDP and in the model that I'm using, it would be very difficult to generate a contraction of that magnitude. I would love to see the details or the rational for the PBO and Merrill forecasts .


Stephen Gordon said...

This is the thing, isn't it? Unless we see a model or some story that gets those numbers, it's hard to tell how plausible they are.

Shock Minus Control said...

Yeah, its a little frustrating. Extraordinary claims require extraordinary evidence.

Marc said...

But at best, your or any other model is going to be based on data in the post-war era, so by definition you will not be able to generate results that are worse than the worst recession in that era. For a collapse in asset prices on this scale, we have to go back the Great Depression.

James Galbraith has a good critique of current modeling in his testimony to Congress last week. Well worth a read.

Phillip Huggan said...

Commodity prices collapsed the quarter before Q1 2008. I don't see public sector spending contracting much/any and we (under a Republican Harper government that is the last to preceed massive boomer healthcare cost increases) are running a 4% of GDP deficit.
A 9% year-over-year contraction is impossible given a weak dollar. It would mean private sector GDP contracts almost 20%. Maybe in southern Ontario if the dollar was still strong. The flight to USD quality has saved Harper's hostile-to-the-future government for now.