As noted just a bit ago, real spending declined by the most since September of 2009.
First quarter GDP estimates were sure to follow, and they did.
The Atlanta Fed GDPNow Model plunged from 2.5% on February 27 to 1.8% today.
Latest forecast: 1.8 percent — March 1, 2017
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2017 is 1.8 percent on March 1, down from 2.5 percent on February 27. The forecast for first-quarter real personal consumption expenditures growth fell from 2.8 percent to 2.1 percent after this morning’s personal income and outlays release from the U.S. Bureau of Economic Analysis.
This was a pretty easy prediction. At the start of every quarter, the estimates are absurdly high, so I come out with a “Take the Under, way under” call.
November 4, 2016: GDPNow 4th Quarter Estimate Surges to 3.1% on Strength in Autos
“At the beginning of the third quarter, GDPNow was a nearly a percentage point too high and also nearly a percentage point above the initial FRBNY Nowcast. Once again I will take the under as I do whenever GDPNow spikes.”
February 2, 2017: First Quarter GDP Forecast 3.4 Percent: How Many Believe That?
I commented: “Does anyone buy that forecast? … I do not buy this enormous jump in predicted GDP for one second.”
Curiously, the surge from 2.3% to 3.4% was based on construction spending and ISM.
Both reports were out again today, but you can see what happened.
The New York Fed Nowcast Model sits at 3.1%. It will plunge on Friday when its next report comes out.
Surprisingly Strong Economy
Today’s reports are all the more humorous given Fed comments yesterday citing a “surprisingly strong” economy.
- Inflation-Adjusted Spending Declines Most Since September 2009: Stagflation Coming?
- March Rate Hike Odds Surge to 80 Percent: New Standard for “Surprisingly Strong” Economy
- Trump’s Speech: Good, Bad, and Ugly Point-by-Point; Was Trump Preempted by the Fed?
- Construction Spending Unexpectedly Declines One Percent
Mike “Mish” Shedlock