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.
Easy Prediction
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.
Related articles
- 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
I’m sure that higher interest rates will help.
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add 10%plus inflation rate,10-15% shrinkflation rate,inflation is a trump rally killer,get out the beaten zone before this thing detonates
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I got out in 2010. Was I early???
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If they raise and the economy tanks close in time, who will get the blame?
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AKA, who will pay the price?
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Let’s seeee, could it beeeeee SATAN??!! aka Donald Trump
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No, you mean “The Fed is Dead” as an institution in that case.
Trump = Andrew Jackson the 2nd when it comes to national banks methinks…..
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So how is it that all of the stock selling pundits are claiming that corporations are making record profits?
Who are they selling to, Martians?
Or are are they simply selling to each other, buying up their competitions market share, or faking it with non GAAP accounting?
And the larger question is….does anyone even want to know? It seems that a market sustained only on emotion would definitely reject any real negative news, but then again, this run up has surely sucked the last of the sideline Muppets into the fray. Reading more stories about record numbers of large investors bailing out of some of these funds…like maybe they think they “know something”.
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“A mathematician, an accountant and an economist apply for the same job.
The interviewer calls in the mathematician and asks “What do two plus two equal?” The mathematician replies “Four.” The interviewer asks “Four, exactly?” The mathematician looks at the interviewer incredulously and says “Yes, four, exactly.”
Then the interviewer calls in the accountant and asks the same question “What do two plus two equal?” The accountant says “On average, four – give or take ten percent, but on average, four.”
Then the interviewer calls in the economist and poses the same question “What do two plus two equal?” The economist gets up, locks the door, closes the shade, sits down next to the interviewer and says, “What do you want it to equal”?
http://www3.nd.edu/~jstiver/jokes.htm
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“Today’s Personal Income and Outlays report shows consumer spending rose less than economists predicted and far less than inflation. The result is a big decline in real spending.”
…
Yeah, well say Hello to the refinance spigot* tightening courtesy of rising rates.
*Consumers refinancing mortgages has been a major stimulus for spending for years.
And an assist to ACA as households have to budget for higher health premiums.
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I haven’t heard a recession call from here in a while, maybe over a year.
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I don’t know that I have EVER heard one. What does it sound like??
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Lacy Hunt correct again!! Too much Debt is a huge drag on growth!! Long end of treasury curve will trend down again. Would be nice to see another DOW crash! And to think people think infrastructure spending will boost the economy, ha, just more borrowing resulting in lower growth.
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Hmmm… In 2013 I said 2400SPX would be the high of this move… then back down to 1,600. I really hope I am wrong.
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The statistical margin of error and faulty inputs/assumptions in these economic forecast models make them mostly useless, like the climate change models predicting higher temperatures for the past 3 decades of slight global cooling. FED will simply look at stock market hitting new nominal highs, and say: If not now, when? Thus, 80% March rate hike odds are likely low. Should be 99.9% Logically, what else can a Central Planning Polituburo do? If they do not boost rates now, they will have no room to cut later. Simple as that. Cannot expect Trump to support negative interest rates, confiscation of cash or even letting Bureau of Printing and Engraving replace Andrew Jackson with Harriett Tubman on the 20 dollar bill.
Would be better if pre-WWI mechanisms of credit and interest rates like Bills of Trade were in effect, and FED was out of the business. But given the love worldwide for Bureaucratic Central Planning mechanisms, will be more of same. GDP “forecasts” make for a good cover story, though.
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Taking a contrarian view here. I agree that the Fed likely raises rates in March but it will be a boost to the current stock market and will send it to even higher levels.
Good new is Good news and Bad News is Good News
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Trade deficit growth further cutting GDP.
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