Making year-out predictions is a fool’s game because it is almost certain that they will be undone by unknown events. These are impossible to predict. The only thing I know is that a falling money supply will either decrease growth or inflation or both. The year-over-year growth in money supply (M2) is zero. It has never done that before. Thus, N-GDP growth is going down for sure. The $64,000 question is will it be the fault of inflation, employment, productivity or some combination. Casting productivity aside, macro forecasting inflation and employment needs to be confirmed regularly and frequently with data on prices and labour, if one is to foretell with reasonable accuracy. I say reasonable because there are no preparatory data prints on productivity that can guide us over the short-term, unlike employment and inflation.
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By Hubert Marleau
By Hubert Marleau