Are forecasters too bullish?
Here is the latest from the Conference Board:
Its outlook projects Canada’s economy to grow 1.7 per cent this year – a far more bullish prediction than the Bank of Canada, which on Tuesday revised downward its growth forecast to one per cent this year.
What is interesting is how the CP report calls them “bullish”. Back in February, I testified before the HouseÂ Finance Committee on the economic outlook and what it means for the federal budget. Glenn Hodgson of the Conference Board, with whom I testified, thought I was too pessimistic and had this to say:
We were actually the most optimistic of all the private sector forecasters right now on our Canadian outlook. We think the Canadian economy can grow at 2.5% this year, but it will be very uneven sectorally and geographically. So the west is best–we think 3% growth or beyond is quite attainable for all four western provinces. Central Canada is very challenged because of the heavy reliance upon sales to U.S. consumers. The industrial heartland is very much challenged. I’m sure you’ve heard from many manufacturers that have talked about the challenges they’re facing.
Not that the Bank of Canada is much better. Its revised forecast of 1% is well below its own estimates earlier this year, which were in the mid-2% range.
I’m pretty skeptical of economic forecasters â€“ the same ones who repeatedly get quoted in stories about the economy without any reference to whether their track records merit such media play â€“ though I recognize that their job is pretty difficult. But it seems to me that when slowdowns or recessions come on they are almost uniformly missed by forecasters. If it is sunny today the best forecast for tomorrow is more sun. I’d like to test this out statistically, so if anyone out there wants to do some pro bono data gathering, let me know.