The Annual Letdown

Every year we are told that this is the year economic growth will finally pick up. This will be the year we hit escape velocity and break away from the sub-2% GDP trap the rest of the developed world has been mired in for seven years.

This year was no different. Economic data had gotten stronger consistently throughout the last two quarters of 2013 and we came into January wearing top hats, swinging a cane. Lust was in the air and everyone was short bonds / long banks for the big breakaway.

Oops!

Now everyone’s pulling their horns in. In the last few weeks, a bunch of Wall Street economists began slashing their full-year GDP growth forecasts, same as they do every year about this time. A new graphic from this morning’s Bloomberg Brief illustrates this phenomenon perfectly:

Optimism may be overrated. since at least 2011, economists have started each year with sanguine forecasts for GDP growth that they have then ratcheted down gradually. so far, this year has been no different.

The Bloomberg consensus full-year GDP growth estimate for 2014 peaked at 2.9 percent in February and has fallen to 2.5 percent. Wednesday’s disappointing trade data indicate that first-quarter GDP may be revised down even further, and challenges are mounting for the second quarter.

As Cher from Clueless said, “I love you for trying!”