Paris-to-Frankfurt Forecasters Beat Wall Street Record – Bloomberg 02-22-13

Salient to Investors:

5 of the 8 most accurate forecasters of the US economy in the two years ended in December 2012 were outside the US. International forecasters use methods based on tracking sales and factory reports and largely ignore public surveys of confidence.

Joshua Shapiro at Maria Fiorini Ramirez consciously try to read very little of the reports of his counterparts because it is very difficult to avoid absorbing other views and having them color your own, thus giving non-US-based analysts a decided advantage.

The overseas economists say they agree with the view that financial crises including the 2008 U.S. crisis are associated with slow recoveries.

Christophe Barraud at Market Securities-Kyte Group said being in France helps him be more objective. Barraud predicts the US economy will expand 1.6 percent in 2013, with unemployment dropping to 7.7 percent, and is concerned that slowing government spending, including the sequester to start March 1, will hold back the acceleration in growth that Fed is forecasting. Barraud said in the short-term, the US has to implement structural reforms and reduce public spending, which implies lower growth.

Ethan Harris at Bank of America said the overseas outperformance is a temporary circumstance – there is much randomness in the monthly data releases and sometimes the best forecasters are simply good at finding some quirks in the numbers.

Bernd Weidensteiner at Commerzbank said there is often a disconnect between actual spending and sentiment, for example in the last quarter. Weidensteiner said studying the huge US economy is best done with a bird’s-eye view – to analyze Jupiter, you don’t have to take residence on that planet.

The median economist expects 1.8 percent growth in 2013 and unemployment for Q4 at 7.5 percent.

Read the full article at http://www.bloomberg.com/news/2013-02-22/paris-to-frankfurt-forecasters-beat-wall-street-record.html

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