Goldman's Q1 GDP Forecast: From 3.0% To 1.0% In Under Three Months

Tyler Durden's picture

Back in December 2013, as we do after every periodic bout of irrational exuberance by Goldman's chief economist Jan Hatzius et al (who can forget our post from December 2010 "Goldman Jumps Shark, Goes Bullish, Hikes Outlook" in which Hatzius hiked his 2011 GDP forecast from 1.9% to 2.7% only to end the year at 1.8%, and we won't even comment on the longer-term forecasts) designed merely to provide a context for Goldman's equity flow and prop-trading axes, we said it was only a matter of time before Goldman (and the rest of the Goldman-following sellside econo-penguins) is forced to once again trim its economic forecasts. Well, as so often happens, we couldn't be more correct.

Overnight, four months after our prediction, the FDIC-backed hedge fund not only that, but so much more that even we were shocked, because from a Q1 GDP which Goldman had originally predicted was going to be 3%, the crack team of economists - or is that team of economists on crack - lowered its Q1 GDP to, drumroll, 1%! And that's in the aftermath of the stronger than expected Durable Goods reports. Because it's only logical that good news is bad news. And vice versa.

From Goldman, hammering the final nail on their coffin of forecasting humiliation:

  • The March durable goods report was the last important piece of source data to be released before the Q1 advance estimate of real GDP next Wednesday (April 30). With the GDP release rapidly approaching, we take a comprehensive look at our GDP tracking estimate.
  • Based on data in hand, real personal spending appears to have grown at a roughly 2.3% annual rate, boosted by a jump in household utilities spending. Components of business fixed investment probably posted moderate gains, while residential investment and net exports were likely a drag on growth. Government looks to have been a roughly neutral contributor.
  • Incorporating new analysis on mining & utilities and farm inventories, inventory investment looks like an even larger drag on growth than we had previously assumed. We are moving our final Q1 GDP estimate down to 1.0%, four-tenths below our last tracking estimate.

But before anyone gets any ideas that Goldman has learned their lesson, or any lesson for that matter, we read this:

We expect Q1 to be the low point of the year for growth, reflecting a substantial weather and inventory drag. Growth should pick up to 3%+ on average for the remainder of 2014.

Yeah, you read that right:

Q1 will probably be the low point of the year for growth


Despite GDP likely growing at an anemic rate of around 1.0% in Q1, we remain optimistic about the rest of 2014. The core narrative for a pickup in growth this year has not changed. The fiscal drag is still lower, consumer spending should still strengthen, and business investment seems poised for a comeback. We see the weakness in Q1 as mainly driven by temporary factors, including a large drag from weather and inventories. The recent encouraging dataflow—with the exception of some of the housing numbers—appears consistent with our forecast for a near-term pickup. For the remainder of 2014, 3%+growth remains our baseline.

Of course, what Goldman forgot to add is that it "probably" will be the low point unless it rains, is windy, sunshiny, hotty, sweltery, meteroite showery, World War Three-y or any other climatic or geopolitical condition that otherwise detracts from the priced to perfection centrally-planned, artificial, manipulated economy.


Let's refresh sometime in, or just after Q4, when growth for the remainder of the year average well below half of what Goldman was expecting.

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Dr. Engali's picture

Fucking idiots. I knew back when they first put out their muppet prediction that we would come in at 1% (and that's not real growth), and I'll be willing to bet that we end the year at 1% or less.

knukles's picture

These Guys are Good@PGA

And don't forget, this includes all the new intangibles funny imaginary claptrap inn the sophistry called hard data.
Propaganda, Deluxe 

These hockey sticks need Viagra

Rainman's picture

Indeed...the Conmerce Department will herewith make GDP growth whatever they would like it to be

NoDebt's picture

Another year of 2% growth offset by a 2% understated GDP Deflator.  (Sorry, I'm an economist by training, so I'm required by law to say unintelligible stuff like that from time to time.)

Flat to down, baby.  Flat to down.  The Emperor's new clothes are beautiful.  Have you seen them yet?

101 years and counting's picture

see what happens when the Fed tightens?  the weather gets horrible and is proof if we dont print, the world may actually end.

jtz5's picture

Can someone explain how GDP has been sub 3% for how many quarters now and corporate profits are still setting records every quarter?  Is it all buybacks and tricky accounting?  This shit has to end soon, right?

Winston Churchill's picture

They called it fraud in pre modern times.

101 years and counting's picture

all that fraud gets stashed on balance sheets during "growth".  once the "growth" is confirmed done, all that shit gets exposed as 1 time charges at the bottom of the cycle.  its why earnings drop 40-50% as revenues "only" decline 5-10%. 

Caviar Emptor's picture

This is Goldman's (and WS) signal to the Fed: "Get ready to Rumblllllllllll!!!"
"Janet to Scotty: Gove me Warp Factor 9 and fast!"
"I dunnnnt naw if she can haandle it maadam!"

philipat's picture

"Can someone explain how GDP has been sub 3% for how many quarters now and corporate profits are still setting records every quarter?  Is it all buybacks and tricky accounting?  This shit has to end soon, right?"

Yes. Generally Accepted Accounting Principles (GAAP) are SO 20th century. Also, US Corporations are pushing margins by offshoring and reducing US wage costs and offsetting US downtrends with uptrends in the EM's. Finally, the US economy will not grow because it is 70% dependent on consumer consumption. So for the economy to grow, consumers have to consume more. Not that likely when net real disposable income has fallen, and still is falling.

To answer your final question, no it can't continue forever and it will end when the whole Ponzi that is the US totally collapses and has to be reset. That might still be several years away because the ECB is still not QE-ing and after that the IMF can intervene. So, remarkably, they can still keep this thing afloat for several more years. Unless China elects otherwise..

There you go, that's not rocket science is it?

Smegley Wanxalot's picture

LMFAO. ... And the MSM will spin it as good news, or they will never report it at all.  Viva le ZeroHedge.

SDShack's picture

Actually, the initial GDP print will come in at slightly over 1%. Say 1.2 or 1.3 and it will be spun as a better then "expected". The later revisions will show the truth. 1% at best with lots of excuses, but mostly the "weather".

JustObserving's picture

Now if they used real inflation, which is at least 3% higher, instead of the fake one manufactured by the BLS, growth would be -2% or lower for Q1:

philipat's picture

Damn. If only we could have predicted that Winter involves bad weather....

SDShack's picture

I filled up my tank a week ago at $4.19/gallon here in SoCal. Now it's $4.29. It will easily be around $4.50 this summer, and with the expected "unexpected" refinery fire, I suspect it will be $5/gallon in places. The economy in 2008 couldn't handle $4.50 gas. It sure as hell won't handle $5 gas. Throw rising food prices in, and the big 0zer0care premium increases this fall, and things only get worse from here.

pods's picture

Forecast 1%, initial comes in at 1.2%, stawks soar.

Revisions later bring it down to 0.6% so Q2 can look good when it is fudged, I mean, released.

This economic forecasting is pretty easy stuff.


Bernoulli's picture

1% GDP growth with an (estimated) inflation of about 3-4% means significantly shrinking GDP!

Can anybody please finally admit that?

The problem is: Nobody of those analysts feels any shame, remorse or feels humiliated, because nobody holds them accountable.

The general public has an attention span of a couple of seconds (huh, what!?!) and a long-term memory back to the last time they opened their FB app on their Iphone.

So who still remembers (or goes back to "old" documents and articles to check) what Goldman Sachs Global Investment Research said 3 months ago?

That's the problem.


overmedicatedundersexed's picture

0 interest for 5 fucking years, and some here wonder why corp profits are high..if interest rates ever rise, the whole economies of the world crash, and a new dark age bet with the zip rate guys, works so far. and sell me your PM's useless as they are.

MFL8240's picture

The sewage is back in the news lying again.  This group at Goldman is trash and they are outright liars!  The 3% was to help run the equity market higher while they bailed out.  Reality is, with inflation, we have a negative growth and that is why we are in the Ukraine starting yet another banker’s war!

Sudden Debt's picture



Smegley Wanxalot's picture

So the following two statements need reconciliation:

"...real personal spending appears to have grown at a roughly 2.3% annual rate, boosted by a jump in household utilities spending." 

So this means people blew a higher than growth average rate of money on heating (essentially) due to the weather, but above average spending is a boost, and a boost is a boost.

"... low point of the year for growth, reflecting a substantial weather and inventory drag"

So which is it ... a low point caused by bad weather, or a boost caused by bad weather.  The algos need to know.  Freakin propaganda bullshit.


knukles's picture

Well of course, Smegley.  Each additional quantum energy packet generated and spent made for additional quantum packets to go shopping at WalMart and Dollar Stores.
Tinkle Down my Leg Economics at the subatomic level 
Like the New Application of Bell's Theorem dealing with Locality.

The Politicians put a spin on it and we get sick. 

Sudden Debt's picture

If you want to bring logic to this game, you're paying for the beers.

sodbuster's picture

It's all a rigged BS game. Wrestling is for real compared to Fraud Street. A 1.0% est. followed by 1.2% actual, and the market tacks on another 100 S&P points. A complete joke.

oklaboy's picture

and that is the good news

Rising Sun's picture

But S&P500 revenues and earnings keep going up.  LMFAO!!!!!!!


Have you figured it out yet Yellen?  You took a job where you are fucked before you started.


How's it feel to be left holding the bag Yellen, you stupid cunt???

Calculus99's picture

I wonder if he'll apologise to all the muppets, sorry I mean long standing and important customers, about how wrong his calls were.

Or where they wrong????

Oldwood's picture

Cycles with diminshed highs and increasing lows. People act in cycles, in varying levels of manic depression. Reality appears and they pull back, but after a time they MUST do something, the only thing they can do, and spend. But each sucessive cycle has less to spend, or to borrow. Business is like this, or at least I know mine is. I see the coming tragedy but what can I do, sit on my hands waiting for the world to end? I eventually turn away from the doom (normalization of course) and look forward, investing in my business. Each time though, with less inclination towards any real optimism. Mostly just a need to do SOMETHING. The cycles get shorter and more depressed.

Spungo's picture

Americans will get 3% fatter therefore consume 3% more food and 3% more gas. Therefore 3% more spending and thus 3% GDP. It's science.