Consensus Economist Estimates for the Year Ahead

Bloomberg recently published their December survey of 63 economists for a number of economic indicators.  Below we have charted the median forecasts from this survey of GDP, CPI, the Fed Funds Rate and the 10-Year Treasury yield.  As shown, GDP is expected to bottom this quarter and gain 1.5%, 2.1%, 2.5% and 2.7% in the four quarters of 2008.  CPI is expected to top out this quarter at 3.8% and then decline to 3.2%, 2.5%, 2.6% and 2.3% by Q4 '08.  The Fed Funds Rate is expected to decline to 4.0% in the first quarter of 2008 and remain at that level for the remainder of the year.  From this forecast, economists expect just one more rate cut in the current easing cycle (at least through 2008).  The yield on the 10-Year Treasury is expected to bottom in the first quarter and then rise to 4.5% by the end of next year.

On the outset, these numbers look pretty good, as the worst seems to be over for the economy (GDP up, CPI down), however, when we look at their forecasts for Q1 '08 from past surveys, we see that expectations have steadily weakened.  Back in February of this year, expectations for the first quarter of 2008 were much more rosy. 

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