New York Fed, Atlanta Fed, & Goldman Slash Q3 GDP Forecasts

Tyler Durden's picture

As 'hard' economic data in America crashes to its weakest since Feb 2009, so The New York Fed has slashed its economic growth forecasts for Q3 and Q4 dramatically.

The drivers of the collapse are hurricane-impacted data from Industrial production and Retail Sales this morning...

For those hoping for a "broken window fallacy" rebound in Q4, forget it!

source: NYFed

And now The Atlanta Fed has joined the downgrade party...

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2017 is 2.2 percent on September 15, down from 3.0 percent on September 8. The forecasts of real consumer spending growth and real private fixed investment growth fell from 2.7 percent and 2.6 percent, respectively, to 2.0 percent and 1.4 percent, respectively, after this morning's retail sales release from the U.S. Census Bureau and this morning's report on industrial production and capacity utilization from the Federal Reserve Board of Governors.

From 4% a month ago to just 2.2% now!!

source: AtlantaFed

 

Putting the recent data in context, here is the "Hard" economic data surprise index.

 

And then, the cherry on top came from Goldman Sachs which just slashed its hurricane-impacted Q3 GDP forecast from 2.0% (it was 2.8% just one week ago) to 1.6%. To wit:

Industrial production fell sharply in August, but the report explicitly indicated that Hurricane Harvey likely contributed the bulk of the decline. University of Michigan consumer sentiment declined a bit less than expected in the preliminary September report, and the survey’s measure of longer-run inflation expectations moved back up to 2.6%. Taken together, today’s real activity data represents strong evidence that hurricanes have significantly reduced the pace of US growth in the third quarter. Accordingly, we revised down our Q3 GDP tracking estimate by four tenths to +1.6% (qoq ar), on top of the -0.8pp revision we made last week

 

We believe today’s weaker-than-expected retail sales and industrial production data increase the likelihood of a meaningful drag on August economic activity from Hurricane Harvey. And given the possibility of sustained weakness in September due to Hurricane Irma, we now expect an even larger drag on growth in the third quarter. We are reducing our tracking estimate for Q3 GDP by four tenths to +1.6% (qoq ar), on top of the -0.8pp revision we made last week in anticipation of Hurricane effects. We expect some of this weakness to reverse in the fourth quarter as economic activity rebounds in storm-affected regions.

So - NY Fed Staff Nowcast Q3 2017: 1.34% (Prev. 2.1%); Q4 2017 at 1.83% (Prev 2.6%)

Which means that, if NY Fed is correct, and one adds the actual GDPs of 1.2% in Q1 and 3.0% in Q2, full year 2017 GDP Growth wil be just 1.8%! 

Just blame it on the hurricanes.

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Fake Trump's picture

Warning rather than winning!!

spastic_colon's picture

wouldnt be the USSA if downgrades, bad econ data, slower growth memes, lower gdp analysis, etc etc wasn't being ironically paraded right before a fed meeting......

Caloot's picture

They needed an excuse.  Hurricane.  All done, go back to bed.

American Psycho's picture

The weather has been a  nice whipping boy over the last few years.  Just like Goldilocks, too warm, too cold, but never just right.

SDShack's picture

The Hurricane Excuse for Summer/Fall will give way to the Record Cold Winter Excuse preventing people from shopping (caused by Global Warming BTW), unless we experience Record Warm Winter which also makes people stop shopping because they don't need cold weather clothes and gear (also caused by Global Warming BTW). It's been this way every year for at least the last decade. Rinse and Repeat.

Iskiab's picture

Yea, hurricanes will get the rap, but name me the last time there hasn't been a downgrade from overly optimistic numbers.

They want sales, positive forecasts help sell, and eventually reality hits so to save some face they have to downgrade before the actual numbers hit to have a modicum of credibility.

yogibear's picture

Signals more and massive QEs. Bullish!!!

Iconoclast421's picture

What is going on with SPY? It was at 250 now its at 249. My 247 calls are still at the same price so I guess it doesnt matter but still it is odd.

jamesmmu's picture

and.....

 

so what?!

shizzledizzle's picture

The FED... Finding ever bigger barns so they can hit the broadside of them. 

buzzsaw99's picture

gdp is one of those orwell numbers like the gin ration.

Winston Churchill's picture

The straws that broke the camels back.

Prof. Tainter to the red courtesy phone stat.

Mr. Pain's picture

 if NY Fed is correct - 2017 GDP Growth wil be just 1.8%!

 

So much for raising the GDP to lower the deficit! 

John Law Lives's picture

The "assumed" GDP growth projection supporting Trump's 2018 budget plan was reportedly 3%.  So much for that.

http://blog.euromonitor.com/2017/06/can-republican-tax-cuts-deliver-3-ec...

hxc's picture

We did an annualized 3% last quarter. Relax

John Law Lives's picture

From the article:

"Which means that, if NY Fed is correct, and one adds the actual GDPs of 1.2% in Q1 and 3.0% in Q2, full year 2017 GDP Growth wil be just 1.8%!"

grasha87's picture

I have a solution to the problem of the monetary system based on debt which cause recessions. It's called the wallark, and is a currency based on Say's law: https://bunky1787.wordpress.com/2017/09/06/the-wallark-neo-scrip/

GodHelpAmerica's picture

GTFO of the dollar. You've been warned.

headfake's picture

Like it will make any difference to anything? All these fed announcements dont mean shit while they are buying assets and prinitng like never before.

GoldHermit's picture

Interest rate hike my ass.  Go ahead shrink your balance sheet - I dare you.  We're Fucked (notice the capital F)

yogibear's picture

It will be a drop. They'll have to remove those 1/4 % hikes.

More and larger QEs on deck.

yogibear's picture

Goes along with Trump's debt ceiling removal and the removal of the debt sign in NYC.

Crushing the US dollar.

hxc's picture

Fuck the dollar, i am long metals and short the NWO

John Law Lives's picture

Since when does GDP data matter to algobots?  If it did matter, TPTB would simply reformulate how GDP is calculated.  Stawks to da moon!

FUBAR

Snaffew's picture

as soon as all those texans and floridians receive their gubbermint subsidized insurance checks, then the gdp growth will surge once again.  Creating debt to give to Muricans so they can spend, spend spend and doctor up those insidious and bullshit numbers.  The game must go on until it absolutely can't.  i figure there's another 6 or 7 years left in this bull market before reality checks in globally.

mily's picture

Pretty funny to watch every quarter markets fall for the same con: GDP forecast is super duper (i.e. 4%) to be revised to < 2%) same jawboning techniques as for everything  else  

Sampcal64's picture

15% corporate tax rate
Smiling Dems and Donald
= more QE, more entitlements, unlimited debt ceiling fed purchasing of equities, inflated markets....

We will always pay????

Chippewa Partners's picture

They didn't see 2007, 2008 in any forecast either.   Come on Trump, end this nonsense. 

Batman11's picture

Sub-prime mortgages maxed. out

Sub-prime auto loans maxed. out

Payday loans maxed. out

Greece maxed. out

You can’t run an economy on debt. 

Batman11's picture

Neo-liberalism backed us into a corner where interest rates can’t be raised.

Capitalism goes wrong in the 1930s, 1970s and now.


Each version of capitalism gives power to a different group and as they realise that power they break the system.

The reckless bankers blow up the global economy in the Wall Street crash of 1929 as supply side, orientated economics gives them too much power.

The reckless union leaders lay the economy low in the 1970s as demand side economics gives them too much power.

The reckless bankers blow up the global economy in the Wall Street crash of 2008 as supply side economics gives them too much power.

The pattern becomes obvious.

 

In the Keynesian era the target was full employment.

This eventually gave too much strength to workers who became more and more militant in their demands.

All predicted way back in 1943 by Kalecki.

http://delong.typepad.com/kalecki43.pdf

In the supply side, orientated eras of the 1920s and now, they use neoclassical economics that doesn’t look at private debt, and the bankers have a field day with their debt products.

https://cdn.opendemocracy.net/neweconomics/wp-content/uploads/sites/5/2017/04/Screen-Shot-2017-04-21-at-13.52.41.png

 

The UK:

It's that neoclassical economics again, no one was looking at private debt.

https://cdn.opendemocracy.net/neweconomics/wp-content/uploads/sites/5/2017/04/Screen-Shot-2017-04-21-at-13.53.09.png

We were travelling down the dead end street of debt with Thatcher and Blair and by 2008 the economy was saturated.

 

What can we do now?

Keep interest rates low to stop a debt implosion (debt deflation).

Maintain asset prices with QE.

 

The system is broken.


SDShack's picture

The system isn't broken. It is working perfectly as designed by the elites to destroy the world middle class and usurp all middle class assets. The Representative Democratic World Order is being replaced by a New Feudal World Order with the Elites (Nobles) controlling all assets, and using their wealth to finance the Security State (Knights) to enforce debt/labor slavery on the masses (Serfs).

Batman11's picture

The rich have been doing this since the dawn of civilisation.

They take everything and then it all falls apart because they have taken everything, e.g. the Roman Empire.

 

Batman11's picture

Bankers know what they should do, but they don’t do it.

“We need to be bailed out so we can lend into business and industry”

This is called productive lending and gives a good return in GDP (UK graph before Thatcher).

Most of their lending goes into financial transactions (mainly real estate) and financial speculation, this is called unproductive lending and gives a poor return in GDP and shows up in the graphs above.

Less than 20% of lending in the US and UK goes into productive lending, hence the graphs above.

A simple, but very important distinction.

Bankers left to their own devices do all the wrong things, globally, they called it financial liberalisation.

A 15 minute primer on how banks, money and debt really work and what you need to do to ensure financial stability.

It isn’t hard.

https://www.youtube.com/watch?v=EC0G7pY4wRE&t=3s

Central bankers pay attention, you are going to learn something.

 

 

Batman11's picture

Leaving bankers to their own devices with financial liberalization:

“What is wrong with lending more money into real estate?” Australian, Canadian, Swedish and Norwegian bankers now

“What is wrong with lending more money into the Chinese stock market?” Chinese banker pre-2015

“What is wrong with lending more money into real estate?” Chinese banker pre-2104

“What is wrong with lending more money into real estate?” Spanish banker pre-2012

“What is wrong with lending more money into real estate?” Irish banker pre-2010

“What is wrong with lending more money to Greece?” European banker pre-2010

“What is wrong with a NINA (no income, no asset) mortgage?” US banker pre-2008

“What is wrong with lending more money into real estate?” US banker pre-2008

“What is wrong with lending more money into real estate?” Japanese banker pre-1989

“What is wrong with lending more money into real estate?” UK banker pre-1989

“What is wrong with lending more money into real estate?” Australian banker pre-1989

“What is wrong with lending more money into real estate?” Canadian banker pre-1989

“What is wrong with lending more money into real estate?” Scandinavian banker pre-1989

Oh dear

grasha87's picture

I have a solution to the problem of the monetary system based on debt which cause recessions. It's called the wallark, and is a currency based on Say's law: https://bunky1787.wordpress.com/2017/09/06/the-wallark-neo-scrip/

wholy1's picture

DUH!  Int'l corp decimated "merkaan middle - now lower-class" increasingly "tapped out" to both "Fraud Preserve" (Fed) extended FIAT debit-credit AND existing currency liquidity being sucked up by the "wall street big-boys/rent-seekers" increasing need for a coupon fix to cover all the margin calls on EVERYTHING.

Catahoula's picture

Est cuts to 2.2 much too low. 

Eagle40's picture

No fucking shit Sherlock. Like we didn't see this coming.