Submitted by EconWeekly

The GDP estimate for the first quarter is out, so it’s time to update my ranking of the Wall Street Journal forecasters. (Remember: to pit forecasters against each other I use the Root Mean Squared Error (RMSE) and the most accurate forecaster is the one with the lowest RMSE, among all who have submitted at least ten forecasts since May of 2004. I only include the predictions submitted in the months of February, May, August and November for quarters Q1, Q2, Q3 and Q4, respectively. The Q1 forecast is the one submitted in February, the Q2 forecast is the one posted in May, and so on.)

According to the latest ranking, the most accurate forecaster is Gene Huang of FedEx, pushing Gary Thayer of A.G. Edwards to second place. Resler and Hoffman keep third and fourth place, respectively. The median forecast falls from 6th to 10th. The lanterne rouge continues to be James Smith of the University of North Carolina. At 2.6%, his forecast for 2008:Q1 was as inaccurate as usual.

The naive forecast, which is equal to the growth rate observed during the previous quarter, would have been spot-on this time, since GDP grew by 0.6% in both Q4 and Q1. Historically, however, it has performed worse than any forecaster but one.

Only Edward Leamer of UCLA Anderson Forecast was right on the mark. The predictions of 38 of the 52 forecasters were within one percentage point of the truth.

Top-20 WSJ forecasters, by Root Mean Squared Error (RMSE), as of 2008:Q1

Rank Forecaster Firm RMSE

Absolute deviation for 2008:Q1
1 Gene Huang FedEx Corp. 0.95 0.4
2 Gary Thayer* A.G. Edwards 0.95 –
3 David Resler Nomura Securities International 1.01 0.8
4 Stuart Hoffman PNC Financial Services Group 1.01 0.6
5 Allen Sinai Decision Economics Inc. 1.01 0.1
6 Dana Johnson Comerica Bank 1.02 0.1
7 Nicholas S. Perna Perna Associates 1.02 0.3
8 Mike Cosgrove Econoclast 1.02 0.4
9 J. Prakken and C. Varvares Macroeconomic Advisers 1.03 0.1
– Median – 1.05 0.6
10 Scott Anderson Wells Fargo & Co. 1.07 0.4
11 Nairmen Behravesh Global Insight 1.08 0.9
12 John Lonski Moody’s Investors Service 1.08 0.8
13 Edward Leamer UCLA Anderson Forecast 1.08 0
14 R. Berner and D. Greenlaw Morgan Stanley 1.08 1.3
15 Douglas Duncan Mortgage Bankers Association 1.09 0.2
16 Robert DiClemente* Citibank SSB 1.09 –
17 Diane Swonk Mesirow Financial 1.09 0.1
18 Neal Soss Credit Suisse 1.11 0.1
19 Dean Maki Barclays Capital 1.12 0.4
20 David Rosenberg Merrill Lynch 1.12 1

Source: WSJ’s survey of forecasters and author’s calculations.
*Not in WSJ group of forecasters, as of February 2008.

The May forecast for Q2 is also available now. On average, the top five forecasters according to my ranking predict growth of -0.1%. The median of all forecasts is 0.3%.

Previous ranking

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