Consensus Economic Forecasts: Continuously Over-Optimistic

Beginning the year the consensus outlook for global economic growth was more optimistic for 2014, to be driven by the high-income countries. This has not transpired as expected with the most notable weakness in the US, the world’s largest economy. Real gross domestic product (GDP) decreased at an annual rate of -2.9% in the first quarter but the inclement weather has been blamed.

However, while the weather is the excuse this year the chart below shows that that missed economic expectations is not a one off phenomenon.

Source: Zerohedge

This had not stopped financial markets moving higher over the same period. But it is worth noting that against this backdrop of weaker than expected economic growth the US Federal Reserve was ramping up its bond purchase program (QE). However, the Fed are now close to ending QE so it seems plausible that financial markets should become more sensitive to missed expectations once monetary policy support is removed.