Just when you thought it was safe to hike rates, The Atlanta Fed takes an ax to its Q4 GDP forecast, smashing it to cycle lows following this morning's unexpected weakness in consumer spending.
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2015 is 1.8 percent on November 25, down from 2.3 percent on November 18.
The forecast for the fourth-quarter rate of real consumer spending declined from 3.1 percent to 2.2 percent after this morning's personal income and outlays release from the U.S. Bureau of Economic Analysis.
The Atlanta Fed model is now almost half 'consensus' expectations...
Which only serves to confirm Goldman's earlier mark down...
This morning’s data were net negative for our tracking estimate of Q4 GDP growth, which we lowered by three tenths to +2.0% (qoq ar).
Weaker-than-expected consumer spending for October implies less consumption growth for the quarter as a whole (we revised down our Q4 PCE estimate to +2.5% from +3.0% previously). There were partial offsets in today’s data on housing and equipment investment, as well as inventory accumulation.
Assuming this 1.8% growth in Q4, that means full year GDP will average 2.1%, well below the 2.4% in 2014. Time to hike rates for sure!!