Forecaster of the Month: CIBC economists win forecasting contest with highest score in 10 years

The world economy is slowing, but that doesn’t mean that America’s economy can’t do OK, says Avery Shenfeld, chief economist for CIBC World Markets and the winner of MarketWatch’s Forecaster of the Month for September.

Shenfeld, with colleague Andrew Grantham, earned the highest score in the contest since a scoring change in 2005 made high scores more difficult to earn.

Competing against 47 other forecasters, Shenfeld and Grantham had the most accurate forecasts on an incredible six of 10 indicators that we track in our contest: nonfarm payrolls, the consumer price index, retail sales, durable-goods orders, the trade deficit and industrial production. Their forecast for new-home sales was the second most accurate.

Shenfeld admitted that the team’s accuracy in September to the last decimal place owed a bit to luck — you don’t hit nonfarm payrolls and four other indicators on the nose without it — but they have shown consistency that goes beyond dumb luck. Over the past 12 months, they are the fourth most accurate forecasters.

Made-in-America expansion

“The world is slow,” Shenfeld said in an interview, but he’s comfortable with his forecast of “a steady- as-she-goes environment” for the U.S. economy.

Despite the bumps in the road from the strong dollar, weak global demand and falling commodity prices, “we’ll have a made-in-America expansion that rides off consumption and housing.” He sees the economy continuing to grow at around the same 2.5% pace it’s been growing at for years.

He sees global growth turning higher next year, as China comes out of its slowdown with the boost of stimulus spending. India has room to ease monetary policy, and resource-rich nations, such as his homeland of Canada, will adjust to lower prices and lower investment growth.

For the U.S. economy, the modestly upward trend continues, not only in consumption and housing but in hiring as well.

He predicts the Federal Reserve will raise rates in December, but he cautions against reading too much into that move. “Commentators need to take a chill pill,” he said.

“As long as the economy is doing well enough,” he said, “they can hike rates without it being a cataclysm.” The Fed can always reverse course if it needs to, as current Fed Vice Chairman Stanley Fischer did when he was governor of the Bank of Israel.

Shenfeld & Grantham’s Forecast Actual*
ISM 52.5% 51.1%
Nonfarm payrolls 173,000 173,000
Trade deficit -$ 42.0 bln -$ 41.9 bln
Retail sales 0.2% 0.2%
Industrial production -0.4% -0.4%
Consumer price index -0.1% -0.1%
Housing starts 1.15 mln 1.13 mln
Durable goods orders -2.0% -2.0%
Consumer confidence 96.3 103.0
New home sales 531,000 552,000
*Subject to revision
September contest

The runners-up in the September contest were the three forecasters ahead of Shenfeld and Grantham in the annual standings: Spencer Staples of EconAlpha, Haseeb Ahmed of White Pine Capital and Jim O’Sullivan of High Frequency Economics. Joshua Shapiro of MFR Inc. took fifth place in September.

The median forecasts that MarketWatch publishes in the economic calendar come from the projections of the 15 forecasters who have scored the highest in our contest over the past 12 months, as well as the forecasts of the most recent winner. So far this year, the MarketWatch consensus forecast has been more accurate than the Bloomberg consensus 62% of the time.

See our economic calendar and consensus forecast.

Over the 12 months the top forecasters are Jim O’Sullivan of High Frequency Economics, Haseeb Ahmed of White Pine, Spencer Staples of EconAlpha, Avery Shenfeld’s team at CIBC, Ted Wieseman of Morgan Stanley, Brian Jones of Société Générale, Jan Hatzius’s team at Goldman Sachs, Eric Green’s team at TD Securities, Mike Montgomery’s team at IHS Global Insight, Lewis Alexander’s team at Nomura Securities, Paul Mortimer-Lee’s team at BNP Paribas, Jeffrey Rosen of, Peter Morici of the University of Maryland, Ethan Harris’s team at Bank of America Merrill Lynch and Ian Shepherdson of Pantheon Macroeconomics. – Top Stories

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