Skip to main content

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

Image placeholder title
Scroll to Continue


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