The advance GDP estimate for the fourth quarter of 2011 was released on Friday, 27 January 2012, with that quarter's inflation-adjusted GDP figure being reported at $13,422.4 billion, in terms of constant 2005 U.S. dollars.
That value is just 0.29% higher than what we would forecast using our Modified Limo method for projecting the value of GDP in the next quarter, using the final value of $13,331.6 billion for the third quarter of 2011.
On a side note, since Political Calculations was on our annual year-end hiatus when that final value for 2011-Q3 GDP was reported, and because we had never updated our previous public projection of $13,393.3 billion, the advance figure for 2011-Q4 real GDP is just 0.21% higher than our last posted forecast.
In any case, we anticipate that this figure will be revised lower by the time the BEA's third estimate for 2011-Q4's GDP is recorded.
Looking forward and assuming that the forecast given our Modified Limo methods follows a normal distribution with respect to the trajectory of real GDP, we currently anticipate the following for GDP in the first quarter of 2012, in terms of constant 2005 U.S. dollars:
A 68.2% probability of falling between $13,357.5 billion and $13,640.0 billion.
A 95.0% probability of falling between $13,216.3 billion and $13,781.3 billion.
A 99.7% probability of falling between $13,075.0 billion and $13,922.5 billion.
The midpoint for our forecast range for real GDP in 2012-Q1 is currently $13,498.8 billion. We will revise these projections as the U.S. Bureau of Economic Analysis revises its estimate of real GDP in 2011-Q4. The BEA will release its second and third estimates of real 2011-Q4 GDP in February 2012 and March 2012 respectively.
At present, it appears that our overall forecast of U.S. economic performance remains on track. We continue to anticipate that the most recently reported pace of economic growth will begin decelerating in the first quarter of 2012.
For our GDP forecasts, any major deviation from our projections is an indication that the U.S. economy is undergoing a significant change in its overall economic trajectory, which you can see in our chart above whenever the economy goes through a major turning point. One advantage of our methods is that the results are useful, even on those rare occasions when they turn out to be off target.
If you'd ever like to play along at home, we've created a tool that will calculate the midpoint of our forecast range!
Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:
Political Calculations' U.S. GDP Temperature Gauge provides a means to quickly evaluate the growth rate of the U.S. economy against the backdrop of how the economy has performed since 1980, with the "temperature" color spectrum ranging from a recessionary "cold" (purple) through an expansionary "hot" (red).
The GDP Temperature Gauge presents both the annualized GDP growth rate as reported by the U.S. Bureau of Economic Analysis reports for a one-quarter period and also as averaged over a two quarter period, which smooths out the volatility seen in the one-quarter data and provides a better indication of the relative strength of the U.S. economy over time.
Recession Probability Track
Political Calculations' Recession Probability Track shows the probability that the U.S. economy will be in recession 12 months from the indicated date (shown in red) while revealing the probability trend over the past four years.
Previously, the probability of recession peaked at 50% on 4 April 2007, which means that March-April 2008 was the most likely period in which the NBER would have found the U.S. to be in recession.
As it happens, they almost did. The NBER instead chose December 2007 as the beginning month of the most recent recession (we had found a 46% probability for a recession beginning in that month!)
The Recession Probability Track ceased to be a leading indicator of recession in the U.S. following the Federal Reserve's adoption of its current Zero Interest Rate Policy, where the Fed artificially constrains short term U.S. Treasury yields near zero percent.
We continue to post the Recession Probability Track to monitor the yield on the 10 Year Constant Maturity Treasury, where a falling value provides a leading indication of a worsening economy.
On the Moneyed Midways
Political Calculations is also the online home of On the Moneyed Midways (aka OMM), a review of the best posts contributed to the week's best business and money-related blog carnivals, which we ran as a regular weekly feature for the five years from 2006 through 2010.
The link below will take you to the running index containing our most recent back issues (you can easily navigate the index to find older editions.)
The tools on this site are built using JavaScript. If you would like to learn more, one of the best
free resources on the web is available at W3Schools.com.
Other Cool Resources
ZunZun - Exceptional regression analysis tool. Wolfram Integrator - Solve integrals. Do calculus! Create a Graph - Easy-to-use basic graph-making tool. Many Eyes - Data visualization extraordinaire!
Wolfram Alpha - Computational knowledge engine. Khan Academy - Math & science video mini-lectures! Picasion - Animate images.
