As we wait upon the ‘official’ final number from the government regarding first quarter GDP, on April 27 both the Atlanta Fed and JP Morgan downgraded their forecasts to .02 and .03% respectively. And in essence this equates to little more than a rounding error since government modeling adds in double ‘seasonal adjustment’ variables that tend to always skew the outcome positive.
We now believe that real GDP increased 0.3% saar in 1Q. This incorporates the various source data that were released this morning as well as a correction to our treatment of the annual revision to the retail sales data that was released yesterday. The updated details of our forecast are in the table below.
In terms of the retail sales data, it appears that this year the BEA will not incorporate the updated figures until the May GDP report, so this Friday’s GDP release will be based on an older vintage of retail sales data. Reverting to the older data, we think Friday’s GDP report will show real consumption at 0.9% saar. – JP Morgan
And this from the Atlanta Fed earlier this morning.
The final GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2017 is 0.2 percent on April 27, down from 0.5 percent on April 18. The forecast of first-quarter real consumer spending growth fell from 0.3 percent to 0.1 percent after yesterday’s annual retail trade revision by the U.S. Census Bureau. The forecast of the contribution of inventory investment to first-quarter growth declined from -0.76 percentage points to -1.11 percentage points after this morning’s advance reports on durable manufacturing and wholesale and retail inventories from the Census Bureau. The forecast of real equipment investment growth increased from 5.5 percent to 6.6 percent after the durable manufacturing report and the incorporation of previously published data on light truck sales to businesses from the U.S. Bureau of Economic Analysis. – FRB Atlanta
Both JP Morgan and the Atlanta Fed began the quarter with GDP forecasts of over 3%, which signifies their ongoing ignorance of the real economy since we have not had an annual GDP of at least 3% in nearly 10 years.
The bottom line is that whenever the BEA comes out with their quarterly GDP numbers, they are always higher by a range of .3 – .7% than the actual growth output, and this means that because of the fact that Q4 saw less than 2% growth despite it being the biggest consumer spending period of the year, the U.S. economy is likely in recession and may have been going back to the start of 2016.
Kenneth Schortgen Jr is a writer for The Daily Economist, Secretsofthefed.com, Roguemoney.net, and Viral Liberty, and hosts the popular youtube podcast on Mondays, Wednesdays and Fridays. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.