Following yesterday’s existing home sales report, the Atlanta Fed GDP Now Modelforecast for third quarter GDP fell 0.2 percentage points to 3.4%.
We will not see the BEA’s first estimate for third quarter GDP until October 28. The second estimate for second quarter GDP comes out tomorrow. Based on revisions to June data, I expect a lower estimate to second quarter GDP.
Skipping ahead, this is what the Atlanta Fed model projects for third quarter.
Latest forecast: 3.4 percent — August 25, 2016
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2016 is 3.4 percent on August 25, down from 3.6 percent on August 16. After yesterday’s existing-home sales release from the National Association of Realtors, the forecast for third-quarter real residential investment growth declined from 1.0 percent to –2.6 percent.
I’ll Take the Under
For a look at the existing home sales report that took 0.2 percentage points off the forecast, please see Existing Home Sales Sink 3.2% in July, Down 1.6% From Year Ago
I highly doubt we see 3.4 percent.
Upcoming GDP Estimates
The third quarter will be nearly over before the BEA tells us what GDP was for the second quarter. We see the third estimate for second quarter GDP on September 29, and the second estimate of second quarter GDP tomorrow.
On July 28, ahead of the BEA’s first estimate of GDP for the second quarter I went out on a limb and estimated 0.8%, well under the Bloomberg Econoday consensus estimate of 2.6%. Goldman Sachs estimated 2.4%, GDPNow 1.8%, and the FRBNY Nowcast came in at 2.2%, and Markit at 1.0%.
For details, please see GDP Forecast Roundup: GDPNow, Nowcast, Econoday, Goldman, Markit, ZeroHedge, Mish
Fearful Forecast
Taking everything above into consideration, my fearful forecast is the lowest in the group. I estimate second quarter GDP to be +0.8%. I am the lone brave soul under 1%.
Second Quarter Guess
For a recap of the advance (first) estimate of second quarter GDP, please see 2nd Quarter Real GDP 1.2%, 1st Quarter Revised Lower to +0.8%; Bloomberg Spins This Mess Positive.
Tomorrow, unless there are upward inventory or spending revisions (always a possibility in these crap shoots), I expect second quarter GDP to tick lower. Something like 0.9% seems about right. If so, the last four quarters would look like this.
- 3rd Quarter 2015: 2.0%
- 4th Quarter 2015: 0.9%
- 1st Quarter 2016: 0.8%
- 2nd Quarter 2016: 0.9% (Mish Guess)
The Econoday consensus estimate is 1.1% in a range of 0.8% to 1.5%.
Is 1% is the new normal for robust growth?
Mike “Mish” Shedlock
1% is the new normal.
And with that fact, we can see how silly the GDPNow forecast for Q3 at 3.4% is.
I’m using 1% as a default. I figure it is closer to 0 or negative but the government BS bureau is not going to let it go negative and can only BS us to 1% or a bit more. 3% is not even believable to the gullible.
“Is 1% is the new normal for robust growth?”
Q2 could easily be flat.
BEA chose a deflator of 2.22% for Q2
CPI for quarter?
3.42%
And these pathetic year-over-year GDP increases assume that the BLS is not under-stating inflation – which it claims was 0.8% for the 12 months ended July 31.
And on a per-capita basis (which is what really counts), even with the ridiculously under-stated deflator, GDP would certainly be NEGATIVE year-over-year.
Very tough to put lipstick on this ornery, ugly pig.
The US Real GDP has been trending downward since the 1970’s and has averaged about 2% since 2000. So 1% could become the new 2.4% which used to be 4%. What is striking about Friday’s number (my guess is around 1.5%) is that it also includes deficit spending. So 2% of an $18 trillion economy points to activity of $360 billion – but how much of that activity is real, private activity when the federal government pumps $500 billion into the equation?
Actually, the “true new normal” is negative. Nominal GDP must be adjusted by inflation, which has been considerably under reported. I save receipts and my food, insurance and utility bills have all been increasing by 5-7% per year, and that’s compounded!