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By New_Deal_democrat December 28, 2017 9:49 am
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Marking my 2017 forecast to market

It's the end of the year and so in this, my last post of the year (except for Weekly Indicators), let's take a look back at the forecast for 2017 I made one year ago, and mark it to market.

My forecast, as usual, came in two parts: first, using the K.I.S.S. method of going by the Index of Leading Indicators for the first six months ahead, and then looking at the constellation of long leading indicators to look ahead into the second half of the year.


In my first part, I concluded the following:



"There have been only 2 slightly negative readings [in the Index of Leading Indicators] in the last 7 months, during which time the index is up over 1%. [In] December, ... the stock market has made new highs, jobless claims are at their lows, the ISM new orders reading was strongly positive, and motor vehicle sales set a post-recession record.

"All of this says that the first half of 2017 should feature at least reasonably strong growth."

Then at the end of January, once Q4 2016 GDP had been reported including the long leading indicators of real private real estate investment and proprietors' income, I wrote the following about the second half of 2017:


"So to summarize:

-There are only two outright negatives: interest rates and credit conditions.

-There are four positives: real money supply, the yield curve, real retail sales per capita, and the Labor Market Conditions Index.

-Two series - housing and corporate profits - are too mixed to be scored either positive or negative for the entire half, although housing is on balance a positive through Q3.

"The bottom line is that I am not going to call for a recession with at most 3 or 4 of [the long leading indicators] negative. Q3 looks solidly positive, and more likely than not Q4 as well."

So here's what annualized real quarter GDP looks like since the beginning of this expansion:

I would say that indeed looks like reasonably strong growth in the first half of 2017, and a solidly positive Q3.  So far estimates for Q4 are also running in the 2.5% to 3% range.

I started writing about the economy over 10 years ago. In late 2006, I called for a a recession to start by the end of 2007, even suggesting it would be "The Panic of 2008." By early 2009 I was suggesting that the Great Recession was likely to bottom out in the summer of 2009.  Thereafter with various levels of concern, I have been relentlessly positive.

In the next several weeks I will give my forecast for the first half of 2018, and then my forecast for the second half once the first estimate of Q4 GDP is reported near the end of the month.

In the meantime, Happy New Year!

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