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0.General, 1.Market Observations, 2.Economic forecasts, 8.Was Sticky

30 Dec 2015 (TheAge,SMH) – The year market economists failed to see coming

(30 December 2015, The Age, BusinessDay, p22, , Columnist,  View more articles from Malcolm Maiden)

‘Most of the predictions market economists made a year ago turned out to be wrong.’

‘Market seers did not cover themselves with glory in 2015.  In fact, Goldman Sachs says in a research note that US economic forecasters basically got everything wrong.’ <snipped…>

‘Goldman says US economists have overestimated US growth in 13 of the past 16 years, and the International Monetary Fund has also been a repeat offender.’ <snipped…>

‘Reality bit most Australian market economists on the bum, too. In a BusinessDay economic survey published on January 21, 25 Australian economists predicted on average that the Reserve Bank’s cash rate would be unchanged…’ <snipped…>

‘In the January BusinessDay survey, the average forecast was for the terms of trade to weaken by only 3.6 per cent in 2015. Economists at the bearish end of a forecast range, which stretched from minus 15 per cent to plus 7 per cent, were on the money, however. The Reserve Bank’s index of commodity prices fell by…’ <snipped…>

‘You might say it is unfair to single out economists. However, in this season of bold new forecasts for 2016, their mistakes are worth remembering. Commodity price trends were their big miss in 2015 and are a crucial call again, as I will discuss in my next column. As a general observation, the experts have been underestimating for years how long it will take to recover from a hit as concussive as the one the 2008-09 global crisis delivered. Will 2016 be the year the global economy finally, conclusively turns up? Perhaps only if the experts predict that it will not?’

Read the full story (and see graphs of: RBA cash rate, iron ore price) at SMH.com.au

 

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