Wednesday, April 29, 2009

Investment and “animal spirits”

Calculated risk has a nice treatment of The Investment Slump.  We have found that investment as a percentage of GDP tracks very closely with our “animal spirits” measure.  Now, even we are having a little trouble believing our own model’s forecast of a bottom in second quarter, but hope springs eternal.  Anyway, here’s what the history looks like:

The next “animal spirits” forecast will be published after the unemployment rate comes out.  We can only hope that the upticks seen recently in consumer confidence (as we forecast) signal that our forecast of a major turning point in the economy is accurate. 

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