Very wrong, it turns out.
Henry Blodget, who runs the excellent Business Insider, tells us -- and shows us -- exactly how off the mark economists and business analysts are:
It's prediction time again--the time when analysts and economists tell everyone what they think will happen next year.
And so it's a good time to remind everyone that analysts and economists have no idea what will happen next year.
Well, okay, not no idea. But pretty much no idea.
(And I say this as a former analyst. And it's not some huge revelation or secret. Most professional analysts and economists, if they've been around a while, have learned the hard way that economic forecasting is like driving fast at night. Thanks to your headlights, you can see what's coming a few hundred feet in front of you, but you can't see beyond that. And if you're going too fast, by the time you see the unexpected curve or deer [black swan!], it might be too late).
And he points us to a couple of excellent graphs. The first, from Bloomberg, is something called the Citigroup "Economic Surprise Index." (Not making that up, by the way.) It shows the difference between what economists said was going to happen and what actually happened. When the index is zero, the economists were correct. The index doesn't hit zero a lot:
The other interesting graph is from James Montier at GMO, and is even funnier. This graphs the average estimate, from the experts, for the coming year's GDP against the actual GDP:
Of course, it isn't news to us -- or it shouldn't be -- that the consensus estimates of approved experts is often, maybe even mostly, wrong.
But it always seems to take them by surprise.
Why is that?