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01.02.2008 11:54 am

How readers see the economy

St. Louis Post-Dispatch
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This year’s Economic Challenge is now closed, except for 2007-postmarked pieces of snail mail that may yet trickle in. The 47  of you who have been brave enough to make predictions are an optimistic lot overall, but you’re  worried about inflation.

The average entrant sees 2 percent economic growth next year, 5.2 percent unemployment and 3.4 percent inflation in consumer prices, with the Dow Jones industrials rising 1 percent to 13,791. The averages were brought down by  a handful of extremely pessimistic predictions, so it also may be useful to  look at the median. My spreadsheet calculates the median reader forecast at 2.25 percent GDP growth, 5.0 percent unemployment, 3.3 percent inflation and a Dow of 14,100.

The median forecasts for GDP, unemployment and the stock market are remarkably close to the predictions that  two economists, Ken Matheny and John Blixen, made for my Dec. 16 column. But Matheny only sees the Consumer Price Index rising 2.2 percent next year, while Blixen sees headline inflation of 2.7 percent. Those are significantly below the numbers submitted in my contest.  Perhaps readers are too focused on the prices they’re paying at the gas pump, or perhaps they collectively sense something that the professional economists don’t see yet. This one will be interesting to watch.

Let’s all hope, meanwhile, that a reader named John doesn’t win my prize. He predicts a Depression-like year, with the economy shrinking by 6.6 percent, and yet he says prices will soar by the same 6.6 percent figure. John is also our biggest stock-market pessimist, predicting a bear market that takes the Dow down to 9,999.

 

 

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