Among various economic metrics, GDP is by far the most closely watched and representative indicator of economic performance. In addition to the quarterly GDP data released by the BEA, changes in the market's GDP forecasts offer a more timely and even leading analysis of GDP trends. This article highlights three crucial indicators to help track the expected growth of US GDP over the next year.

Introducing the Three Indicators

I. MacroMicro Economic Expectation Index

The MM Economic Expectation Index reflects market estimates of US GDP changes. It is calculated by taking a weighted average of the GDP forecasts for the current and next year from major institutions, including the IMF, World Bank, OECD, and leading think tanks. An increase in the MM Economic Expectation Index signals an optimistic market outlook for the next 12 months.

II. SPF - Real GDP Growth Rate - Forward 1Y Average

The Survey of Professional Forecasters (SPF) is the oldest quarterly survey of macroeconomic forecasts in the United States. Originally conducted by the American Statistical Association and the National Bureau of Economic Research, it has been managed by the Philadelphia Fed since 1990. The survey provides expected values for key macroeconomic indicators such as GDP, consumption, employment, and prices. Based on this survey, MM calculates the average GDP forecast for the current and the next four quarters.

III. NY Fed Average Real GDP Growth over the Next 4 Quarters - Median

The New York Fed's "Outlook at Risk" report employs quantile regression analysis to project the US GDP growth rate over the next four quarters. The model primarily references the Blue Chip Economic Indicators Survey (BCEI) and the Composite Indicator of Systemic Stress (CISS). The chart provided below tracks the median of US GDP growth from this model.

MM Analyst Insights

The long-term average economic growth rate for the US is approximately 2%. If the forecast for the next year significantly exceeds or falls below this 2% threshold, actual GDP tends to follow suit with strong or weak performance. These three indicators reveal a close correlation with actual GDP trends, sometimes even providing a leading signal.

For instance, during the 2008 financial crisis, these three indicators bottomed out at the end of the year, while actual GDP only started to rebound in Q2 2009. Since actual GDP is typically released about a month after the end of each quarter, the monthly MM Economic Expectation Index and New York Fed projections can serve as leading indicators for GDP.

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