SOOTHSAYER CONSENSUS (Negative/Bull Market Indicator): US Economic Growth Forecasts Revised Downward
After a very meagre 1st quarter where economic growth in the US contracted by almost 3 percent, the Soothsayers are now taking their cues and in unison are cutting their GDP forecasts for the next quarter and remainder of the year.
“Goldman Sachs economists trimmed second quarter tracking GDP to 3.5 percent from 4.1 percent, and Barclays economists said tracking GDP for the second quarter fell to 2.9 percent from 4 percent. At a pace below 3 percent, the economy could show contraction for the first half due to the steep first quarter decline of 2.9 percent.”
"We already know that retail sales haven't looked great. This reflects that. This just looks like a pretty restrained path of consumer spending," said Michael Feroli, chief U.S. economist at J.P. Morgan. Feroli said he is maintaining his forecast for 3 percent second quarter growth for now, but the disappointing consumption number puts it at risk.
"The expansion has been about a 2 percent expansion, and it kind of feels like it's continuing," he said. "We're still maintaining a little hope it gets better in the second half." He said the economy does feel like it's turning around from the first quarter's slump, blamed in large part on bad winter weather.
Yet again the Dismal Science’s crystal balls have let them down. At the start of 2014, the Soothsayers were pounding the table that the US economy will break out this year to almost 4 percent. Again their “models” have come up snake eyes. The decline in GDP was driven by lower consumer spending (blame: winter) as well as reduced health-care spending (Obamacare hasn’t rolled out with vigour), and lower exports (ironic as the US$ has been lower this year).
According to Feroli at J.P. Morgan, "It's everything we're seeing now calls it into question. It's not the particularities of this number or that. It's just the overall economy," he said. "When it's moving along, at what pace is it moving along, even without impediments ... it's a little bit of an uphill."
So it appears now that the Soothsayers are tempering their views and going conservative in their estimates. As we’ve seen with the Soothsayer Consensus in the past, when they take a position, it tends to profitable to take the other side of their forecast.