The large divergence between the Atlanta Fed GDPNow forecast and the New York Fed Nowcast remains.
The former upped its forecast today from 3.2% to 3.5% while the Nowcast remains at 2.8% from a week ago.
In addition, the initial Nowcast for 4th quarter is a not so robust 2.0%.
Nowcast September 2, 2016 Highlights
- The FRBNY Staff Nowcast stands at 2.8% for 2016:Q3, unchanged from last week.
- The Nowcast for 2016:Q4 is around 2%.
- News from this week’s data releases provided mixed signals. The largest negative contributions came from a lower than expected ISM manufacturing release and lower than expected imports. Positive contributions came from higher than expected consumer spending and exports.
3rd Quarter Nowcast vs GDPNow
GDPNow updates far more frequently, but has not started to project 4th quarter. I did not place all the data points for GDPNow.
Nowcast 3rd Quarter Detail
Nowcast 4th Quarter Forecast
3rd Quarter Forecasts
- GDPNow: 3.5% (See GDPNow Forecast Bounces Back to 3.5%)
- FRBNY Nowcast: 2.8%
- Markit: 1% (See Markit Chief Economist Estimates 3rd Quarter GDP at “Just Under 1.0 Percent”)
For the sake of argument let’s assume the FRBNY forecasts are accurate. The last five quarters would look like this.
- 4th Quarter 2015: 0.9%
- 1st Quarter 2016: 0.8%
- 2nd Quarter 2016: 1.1%
- 3rd Quarter 2016: 2.8%
- 4th Quarter 2016: 1.7%
Does that look like hike material?
Just so no one gets me wrong. I am not suggesting the Fed shouldn’t hike.
Rather, I am suggesting there should not be a Fed at all. The market should set rates. If it did, we would not be in this mess.
Mike “Mish” Shedlock
Just as a thought experiment, where do you think interest rates would be if the market set them? I think they would be low because there is little demand for borrowing, but not as low as they are now. No sane lender would lend money at 0% or negative rates; they would seek to make some sort of positive return. Supply and demand would rule rather than computer models. Interesting to think about.
Right here, right now rates might be 1.0% to 2.0%
but junk bond spreads would be much wider
Just guessing
Curious on the reasoning for 1%-2%? CBs are supporting bond values, effectively by monetization. They can’t ever shrink their balance sheets because there will be no real growth until the cheap money parasitics are purged. Take away the supports and look out below.
Not hike material, it’s hype material for the election and Hitlary.
Should or shouldn’t is not relevant here.
The answer to your question is: WON’T.
The Fed will hike under the following two scenarios:
[1] Sept, if TRUMP looks like a shoe-in — doubtful by Sept meeting, so NO
[2] When TRUMP wins on Nov 8th, the Fed WILL hike in December in order to crash the market — so MSM can blame it on TRUMP
You make a darn good point that can’t be ignored, Trader.
But I have to ask myself “Is the country really that dirty? Has it really turned that sour?” And if I’m genuinely honest the odds are in your favor of being correct.
After all the dirt that coming out on Hillary (more released emails) and she continues to lead in the polls – I really have to question the neurological health of the majority of the US public.
Maybe Obama should give all Americans one free neurological workup – on the government’s tab.
This stuff is getting more bizarre than a Mel Brooks movie.
Hillary for San Quentin in 2016.
Wall Street has assumed no rate increases all year and will behave accordingly. A quarter point raise has already happened in the (euro) cash marketplace so the Fed might gain some political credibility if they raised but I fail to see how that will stop the endemic corruption, profligacy, waste, lack of accountability, lack of oversight, lack of even the modicum of “Governmental Professionalism” let alone disgusting avarice and transparent war profiteering and price gouging of it all…in short…Bwhahahahahaha.
The bank should normalize rates because “emergency” rates are not doing anything useful at this point in time. To the contrary, printing is producing crazy valuation that misallocates capital. Near ZIRP is also slowly eliminating pensions, IRA/401k savings, and contributing to health insurance super inflation (insurance companies invest mostly in bonds). Even satellite banks have started making nutty loans and derivatives due to near ZIRP. If the bank is supposed to insure the integrity of satellite banks, they need to be encouraged to go back to old fashioned bread and butter banking.
A gold standard would be better, but that may take a few years. Maybe when Japan and Europe turn into banana republics due to wanton printing, people will come to their senses.
Mush, honestly to the real economy, not Wall Street, what difference does it make if they hike or not.
So, the Fed hikes, then announces a hundred billion dollar a month QE. What’s to worry about? Debt doesn’t matter, remember?