Another day, another downgrade to US GDP: after yesterday the Atlanta Fed slashed its Q1 GDPNow estimate from 1.8% to 1.3% - with the forecast as high as 3% at the start of the year, and 2.5% as recently as the end of February - moments ago the Atlanta Fed has once again cut its US growth forecast, and now sees Q1 GDP of just 1.2%, on par with the disappointing 0.9% and 0.8% prints in Q4 2015 and Q1 2016.
The reason, according to the model's author, "the GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2017 is 1.2 percent on March 8, down from 1.3 percent on March 7. The forecast of the contribution of inventory investment to first-quarter growth fell from -0.72 percentage points to -0.79 percentage points after this morning's wholesale trade report from the U.S. Census Bureau."
What the above really means is that what started off with a quarter full of optimistic forecasts population the model's fields, as more and more actual data had to be plugged in, the underlying growth rate continued to get dragged lower and lower, until it barely top 1%. This is taking place one week before Janet Yellen is expected to hike the interest rates by another 25 bps.
Incidentally, the Atlanta Fed is now roughly 50% below the Wall Street consensus estimate for Q1 GDP.
Finally, in the most bizarre chart to have emerged in recent weeks, it appears that the Fed's GDP estimate is now closely following the inverse of the March rate hike odd probability. The good news: at 100% rate hike odds, it is unlikely that the Atlanta Fed will cut its GDP estimate further in the foreseeable future.