It seems generally accepted that recessions are hard to forecast, in both onset and intensity, but the bias seems to be toward rosy outlooks:

The main finding is that, while forecasters are generally aware that recession years will be different from other years, they miss the magnitude of the recession by a wide margin until the year is almost over. Forecasts during non-recession years are revised slowly; in recession years, the pace of revision picks up but not sufficiently to avoid large forecast errors. [...] Strong booms are also missed, providing suggestive evidence for Nordhaus’ (1987) view that behavioral factors—the reluctance to absorb either good or bad news—play a role in the evolution of forecasts.

Of course, this may be put in simpler terms as forecasting having a bias towards things staying on the current course.

I'm curious if there are historically significant examples where the consensus forecasting (or at least that of some major institutions) predicted a [bad] recession that failed to materialize.

  • $\begingroup$ One difficulty with the question is that surveys of private sector economists are often part of paid data services for many countries. Public institutions normally avoid calling recessions, one of the answers gives the only example I can think of. If someone wanted to dig, we had global slowdowns in 1998, 2001, and 2008. Not all countries experienced recessions then. However, since most countries did have a slowdown (even though recession was avoided), not clear how useful the examples would be. $\endgroup$ Mar 28 '19 at 1:48

One example is this UK Government analysis:

"Britain’s economy would be tipped into a year-long recession, with at least 500,000 jobs lost and GDP around 3.6% lower, following a vote to leave the EU, new Treasury analysis launched today by the Prime Minister and Chancellor shows…Speaking at B&Q in Eastleigh, Hampshire, the Prime Minister and Chancellor set out the Treasury’s analysis of the impact on the nation’s economy over the immediate period of two years following a vote to leave. This analysis shows that such a decision would cause an immediate and profound economic shock across the country"

But growth has been consistently positive in the almost three-year period since the vote.

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I'm not sure this a very good example, because there are clear political incentives surrounding this forecast, which might mean it was less than sincere.


In a question here someone provided us with another example. Some Moody analysts predicted in mid-2016 a Trump recession starting in 2018 of varying intensities depending on how much of Trump's policies got implemented:

the economy will be significantly weaker if Mr. Trump’s economic proposals are adopted. Under the scenario in which all his stated policies become law in the manner proposed, the economy suffers a lengthy recession and is smaller at the end of his four-year term than when he took office (see Chart). By the end of his presidency, there are close to 3.5 million fewer jobs and the unemployment rate rises to as high as 7%, compared with below 5% today.

Or under a less dramatic scenario where Congress moderated Trump:

The economy thus slides into recession by 2018. Recession eventually quells the inflation and, with unemployment rising, convinces the Federal Reserve to reverse course and ease monetary policy. Short Term interest rates quickly hit the zero lower bound, and the Fed resumes quantitative easing—purchases of long-term Treasury securities. [...]

By the time the recession ends in 2019, real GDP declines by 1.3%, employment falls sharply, and the unemployment rate peaks at more than 9%.

These scenarios were both predicated on large-scale eviction of illegal immigrants (all of them in the first, just 6 million in the second.)


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