by Mish

The Atlanta Fed GDPNow Model missed the mark pretty badly. Its latest forecast, on January 26, was 2.9% for fourth quarter, a number I thought way too high.

The latest FRBNY Nowcast, from January 20, was close at 2.1%. Let’s take a look at what happened.

Troubling Areas

  1. Residential investment rose 10.2%. Is that going to last with home prices and interest rates both rising?
  2. Imports are up along with the price of oil.
  3. Nonresidential structures are down. With minimum wages rising and store saturation, what’s the incentive to build more stores?

Contribution Troubling Areas

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Private Inventories Added 1% to 4th Quarter GDP

  1. Private inventories added a full percentage point to GDP. That’s an inventory build that was not even needed.
  2. Motor vehicles and parts contributed 0.29 percentage points. Will that last?
  3. Residential investment added 0.37 percentage points. Will that last with interest rates rising?
  4. Net exports reflect rising oil prices, and a rising US dollar that has not hurt exports that much, yet.

Hike Three Times? Really?

Pundits believe the Fed will hike three times this year. In contrast, I have stated I doubt the Fed hikes at all.

With GDP at 1.6% for the full year, really think the Fed will hike thrice?

Global exports have collapsed. And we have not yet seen the effects of Trump’s seriously misguided protectionist trade policy.

This GDP report along with recent economic reports should be very troubling to the Fed. Let’s see what “soft patch” nonsense they spew in next week’s FOMC meeting.

Mike “Mish” Shedlock

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The FRBNY Nowcast for 4th quarter GDP dipped slightly today on account of the wholesale inventory report earlier this week.

Six GDP Estimates (Three Revised Today): ZeroHedge, Mish, GDPNow, Nowcast, ISM, Markit

Tomorrow the BEA will release its advance GDP number for first quarter GDP. I revised my estimate today as did ZeroHedge and GDPNow. The lowest estimate in the group is GDPNow at 0.2%. Here are the numbers starting with GDPNow.

First Quarter GDP Forecast 3.4 Percent: How Many Believe That?

Yesterday, the Atlanta Fed GDPNow Model upped its forecast for first quarter GDP from 2.3% to an impressive 3.4%.

Real GDP Increases 2.9% Led by Exports; Expect Revisions

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3rd-Quarter Real GDP Rises 1.9%, Near Top of Consensus Range

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Hype Over GDP Statistical Noise

The BEA’s second estimate of Third Quarter GDP came in at 3.2% up from 2.9% in the advance (first) estimate.

3% Growth? Really?!

In Trump Plans to Slash Spending by $3.6 Trillion, Increase Military Spending, Balance the Budget in 10 Years I gave my three primary reasons 3% growth will be extremely difficult to achieve.

Explaining the First-Quarter GDP 3.2% Surprise

Real GDP rose 3.2% in the first quarter aided by a questionable measure of inflation.