Fourth quarter GDP forecasts

The WSJ reports that a number of forecasting firms have increased their projections of fourth-quarter GDP growth, from an average (across 7 forecasting firms) of 3.1% to 3.9%. Economic forecasters have adaptive expectations. In the early stages of recovery forecasters are pessimistic because recent data has been pessimistic. As their pessimistic forecasts are proved wrong, they revise them upward to keep up with events (with a lag, of course). It works the same way on the down swing: in early 2008 forecasters were predicting at worst a mild recession because growth had been slowing mildly in recent quarters. Only when the bottom actually fell out did the forecasts catch up with reality. On the basis of this logic, I'm going to say, add 1% to the consensus forecast: fourth-quarter growth in the 4-5% range.