Just One Week Later, Atlanta Fed's Q2 GDP Forecast Crumbles From 4.3% to 3.6%

Tyler Durden's picture

It's deja vu all over again.

Four months after the Atlanta Fed started off its Q1 GDP nowcast at 2.5%, then raised it just shy of 3.5% before eventually crashing, and closing the books at 0.2%, slightly below where the BEA reported Q1 GDP, on May 1 the regional Fed released its initial GDP forecast for Q2, and, as we noted last week, it came as no surprise to anyone that the initial estimate was just a tad optimistic at 4.3%, to which we commented that if past is prologue, "expect this number to end roughly 50% lower in three months when the first advance Q1 GDP report is released."

One week later, we are a third of the way there, because moments ago, the Atlanta Fed did just as expected, and chopped off a whopping 17% from its initial estimate, revising its Q2 GDP estimate from 4.3% as of May 1 (and 4.2% as of May 4) to 3.6%, due to a decline in forecast real consumer spending growth and real private fixed investment.

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2017 is 3.6 percent on May 9, down from 4.2 percent on May 4. The forecast for second-quarter real consumer spending growth and real private fixed investment growth declined from 3.0 percent and 6.9 percent to 2.7 percent and 5.3 percent, respectively, after the employment situation release by the U.S. Bureau of Labor Statistics on Friday. The model's estimate of the dynamic factor for April—normalized to have mean 0 and standard deviation 1 and used to forecast the yet-to-be released monthly GDP source data—has fallen from 0.76 to 0.32 since the last GDPNow update on May 4. The forecast of the contribution of inventory investment to second-quarter growth decreased from 1.11 percentage points to 0.99 percentage points after this morning's wholesale trade report from the U.S. Census Bureau.

The breakdown by component:

  • PCE contribution est. at 1.85%
  • Nonresidential equipment investment contribution est. at 0.34%
  • Nonresidential intellectual property products investment contribution est. at 0.17%
  • Nonresidential structures investment contribution est. at 0.13%
  • Residential investment contribution est. at 0.23%
  • Government contribution est. at 0.02%
  • Net exports contribution est. at -0.12%
  • Change in inventory investment contribution est. at 0.99%

Expect many more such cuts in the coming weeks as the Fed realizes that what it thought was "residual seasonality" - also known as "weather" - was actually a tapped out US consumer, who as the Fed disclosed yesterday, now has an aversion to credit cards and as a result demand for credit cards is now running at the lowest level in the past 5 years. Good luck hitting 3%, or even 2% GDP with no consumer spending.

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small axe's picture

meaningless numbers issued by a criminal enterprise

LawsofPhysics's picture

"meaningless numbers issued by THE criminal enterprise" - FIFY

FrozenGoodz's picture

Gold getting monkey hammered they figured ease up a lil

LawsofPhysics's picture

Why are these usless fucking paper-pushers being so well compensated? Weathermen are more accurate!!!

Dr. Engali's picture

Sooooo., BTFD ahead of future rate cuts? Got it.


We had to raise rates so we can lower them again later.


~Janet Pelosi


Raffie's picture

So they make the economy even shittier so when they back the rates off it looks much better (even thought its back to level it was months ago)

Got it.


CNONC's picture

Off topic, but this could get interesting.  Plutonium finishing plant in WA state has suffered a tunnel collapse.  Knock a few more points off GDP.


RagaMuffin's picture

you may get a job offer from ZH   ;-)


small axe's picture

Hanford, the gift that keeps on giving. It might be that the plant kills more Americans with radiation leaks than it ever kills of the "enemy" from deployment of the nukes created there.

Just another benefit of the arms race.



FrankieGoesToHollywood's picture

knock a few points off?  Are you kidding me?  Those are as good as broken windows.  maybe even better.

RagaMuffin's picture

Watching the FED forecast is like watching monkeys throw shit........

DogeCoin's picture

Hope springs eternal.

F1le's picture

Ha ha ha, it's getting started... Where they gonna finish? I bet around 1% ?


Will be too hot too cold or too much snow?

silverer's picture

If they factor in inflation, I'm sure there's no positive news to sing about.

Juggernaut x2's picture

Doesn't Obammycare contribute quite a bit to GDP? 

Hal n back's picture

it takes too long to wrte commnets--too bad there is no tv network that woudl have panel discussions on these issues. eg, why is Obaacare so bad for the system.

or how can thie nation afford the 74 million people on Medicaid and 68 million on Medicare and about 10 million on heavily subsidized Obamacare. Thats just under half the population being supported by the other half. The least the 84 million receiving free healthcare could do is be polite to the taxpayers.

perhaps say thank you , rather than demanding more free stuff.



PhiBetaZappa's picture
Just One Week Later, Atlanta Fed's Q2 GDP Forecast Crumbles From 4.3% to .36%


Fixed it for you Tyler. Those decimal points can be tricky bastards.

silverer's picture

"We changed some stuff."

Common_Cents22's picture

Piglosi said unemployment payments are STIMULUS!  Just what the economy needs to be sustainable!

BigCumulusClouds's picture

The FED is raising rates into a slowing economy.  This strategy has to be the first in the history of the nation.  When the economic decline accelerates, as it must, look out below.  The result this time will be very different from the rest.  An unexpected QE4 is not simply going to rattle markets, it is going to knock the shit out of them.  The incipient inflation, will cause the DOW to soar yet higher while bonds get crushed.  Then stocks will crash as reality sets in with interest rates climbing, and the precious metals will take off like a Saturn 5 rocket.  The great thing about all this manipulation and deformation is that they've made today's physical gold and silver and the mining shares beyond cheap to purchase.  If you ain't got yours by now, you are crazy because it ain't gona get much cheaper than this.  The FED and the commercials can only manipulate physical markets and mining shares so much via synthetic trading.  In the end, the real market always wins.  Just ask Venezuela. The folks who own gold there will be able to buy up the half the country soon.

Yen Cross's picture

  Meh.. Call me when it's .2%  ;-) [again]

shizzledizzle's picture

I'll ring you about 3 days before the hard data is released.

Bam_Man's picture

Another broken Hockey Stick.

Deep Snorkeler's picture

GDP Growth Below 4% is Fatal

1. Our economy does not grow fast enough to support the growing population.

2. America's military expenditures are the greatest misallocation of resources

in the history of western civilization.

A fatal misallocation for this nation and the world.

3. America has a growing problem with feral children.