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January 26, 2006

Consensus forecasts

While every economist has his or her own forecast for the economy, a potentially more powerful forecast can be derived from averaging many individual projections. N.C. State University's Mike Walden takes a look at what such a consensus forecast tells us about the 2006 economy.

“What I’ve done here is I looked at the averages for a sample of about 30 industry economists. These are people who work for corporations and for security firms and so forth," says the extension economist. "So their forecasts very much put them on the line.

"And their forecasts, I think, are rather upbeat. They are looking for the economy in 2006 to grow at about 3.3 percent -– which is a good number, slightly lower than in 2005," Walden says.

"They are looking for the inflation rate ... to be fairly benign: 2.4 percent increase in the consumer price index.

"Interest rates, they think, will trend upward but not by much –- a quarter to half percentage point.

“And the all important oil price: The analysts overwhelmingly think that oil prices will actually come down in 2006," he says. "We are now around $60 a barrel. They think they will average out for the year at $53 a barrel.”

Posted by deeshore at January 26, 2006 08:00 AM