Moments ago, after the latest disappointing durable goods report, the Goldman economist team was the first to cut its Q4 GDP forecast from 2.2% to 1.9% (and down from 2.4% yesterday), saying "the durable goods report implied weaker capital spending and inventory accumulation for the quarter; details on November consumer spending were also slightly weaker than we had projected."
But even with this downward revision by the traditionally optimistic sellside, it was clear the real number would be even lower: after all 1.9% was the Atlanta Fed's most recent "nowcast" as of December 16, before the latest disappointing data.
Sure enough, according to the just revealed latest forecast by the most accurate forecaster of GDP, the Atlanta Fed, with all the latest data in hand, the US economy is now estimated to have grown just 1.3% in the fourth quarter, down from 1.9%, and the lowest print it has had throughout the forecast period which started in late October.
From the Atlanta Fed:
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2015 is 1.3 percent on December 23, down from 1.9 percent on December 16. After yesterday's third-quarter GDP revision and this morning's personal income and outlays release, both from the U.S. Bureau of Economic Analysis, the nowcast for fourth-quarter real consumer spending growth fell from 2.6 percent to 2.1 percent. The nowcast for real residential investment growth fell from 8.0 percent to 0.9 percent after yesterday's existing-home sales release from the National Association of Realtors.
Worse, if one infers that cold weather had a negative impact on US GDP as was widely said to be the case in 2013 and 2014, then the current period of abnormally warm weather suggests that the "triple-seasonally adjusted" GDP, when stripping away the benefits of balmy weather, is even lower.
If this number persists, it will mean that just as the Fed was hiking rates, the economy once again slowed down to just above stall speed, and absent a dramatic improvement over the next few quarters Yellen will have little choice but to either halt the Fed's rate hike cycle or to reverse it.