Last week the Commission published its second flash estimates for 2013 GDP growth. This allows to update an earlier exercise I had made on forecast errors by the Commission (around this time last year). This is what I had noticed at the time:
The Commission tends to be overly optimistic, and forecasts turn out to be in general higher than actual values. It should not be like this. While I expect a government to inflate a bit the figures, a non-partisan, technocratic body should on average be correct.
Related, it is also surprising that in November of the same year the Commission is still consistently overoptimistic (yellow bar). Let me restate it. This means that in November 2012 the Commission made a mistake on GDP growth for 2012. November!
I had concluded that there was a likely political bias in the Commission’s forecasts, with excessive optimism used to deflect criticisms of austerity. I also ventured in a quick and dirty estimate of the range for GDP growth in 2013, based on the Commission’s past errors. Actual growth turned out to be -0.5%, i.e. at the lower bound of my range (and below the forecast of the time by the Commission, that was -0.3%). I must nevertheless confess that my range was rather wide…
But what about this year? Read more
The latest IMF World Economic Outlook came out last week. It has lots of interesting remarks on the European austerity. Remarkably enough, it poses the problem of timing: fiscal consolidation, if too hasty, may end up being counterproductive. I played a little with the data accompanying the report, including the forecasts.
Last week, among the many bad news for the eurozone, one was in my opinion not sufficiently commented: in September industrial orders in Germany dropped considerably. What is particularly interesting is the source of this drop:
Both foreign and domestic orders declined this time. Orders from outside Germany were dragged 5.4 lower overall by a 12.1 percent plunge in orders from elsewhere in the 17-nation eurozone.
This news is hardly surprising. The latest forecasts from the European Commission confirm what seemed obvious: the wave of fiscal consolidation, largely dependent on the intransigent stance of Germany, is killing European growth. And not too much help can be expected from the United States.
This time it looks like Germany will not be able to export its way out of the crisis, and will have to find growth domestically. If only they resolved to do so, it would be great news for the rest of us as well…