You know the saying, When all you have is a hammer, every problem looks like a nail? How about this data world version, When you don’t track the data, you can’t see the problem? I was drawn to paraphrase the classic hammer/nail adage by the release of the Federal Reserve’s most recent economic projections, the Dot Plot, on Wednesday, March 20 when I thought about the economic data the Fed didn’t include in its projections.
Ever since reports showed the U.S. economy grew at a 5.2% annualized rate in the third quarter, economists have been telling investors to expect lower growth in the fourth quarter. Some of that higher growth in the third quarter, they argued, was pulled from the fourth quarter.
Today’s report from the Commerce Department showing a 0.4% drop in wholesale inventories in October supports the economists’ argument.
Consumer spending, which accounts for about 70% of U.S. economic activity, rose an annualized 0.8% in the April-to-June quarter, according to the third estimate of gross domestic product from the Bureau of Economic Analysis. The last estimate put the annualized growth rate at 1.7%.
Gross domestic product rose at a 1.1% annualized rate in the first quarter of 2023, the Commerce Department reported this morning. Consumers, again, kept the economy going with s 3.7% increase in consumer spending. Business investment in equipment posted the biggest drop since the start of the pandemic and inventories subtracted 2.26 percentage points from GDP in the quarter, the biggest negative impact on GDP in two years. The GDP data showed services spending rose at a 2.3% annualized rate, led by health care and restaurants and hotels. Outlays on goods increased at a 6.5% rate, the most in nearly two years. The results put even more pressure on continued job growth and increases in wages to keep consumer spending growing.
The median projection in a Bloomberg survey of economists called for a 1.9% GDP growth rate in the quarter.
I expect to see the growth economy’s last stand when the Bureau of Economic Analysis the Advanced Estimate of first-quarter GDP on Thursday, April 27. The Atlanta Federal Reserve Bank’s GDPNow forecast predicts that the U.S. economy grew at a 2.5% real year-over-year rate in the first quarter of 2023. That would be roughly equal to the revised 2.6% growth rate in the fourth quarter of 2022. Which would be great news if projections from economists didn’t show growth turning negative in the second and third quarters. The growth estimate for growth for all of 2023 is around 0.4% (the Federal Reserve) or 0.3% (Goldman Sachs.)
This week’s Trend of the Week is Houston, We Have a Trend Problem. The problem with trends is that the data is always old. There is always a lag. Inflation numbers for March will come out on April 28, jobs numbers for March came out on April 7, and GDP first quarter numbers will be in around April 27. These month-old numbers tell us where we’ve been, but we need to know where we’re going–and importantly, the speed at which we’re moving. It’s not just the trend, it’s the momentum of the trend. Inflation is undoubtedly coming down. What we don’t know is how the combination of Fed actions, a slowing economy, and the banking crisis are affecting inflation and economic growth. Currently, core inflation numbers are around 4.5%, and the Fed still wants those numbers closer to 2%, but for how long will the Fed continue to raise rates, and how close will the central bank actually get to 2%?m All that is still up in the air. At the time of filming, the consensus (56%) was that the Fed will raise rates another 25 basis points in May, and then pause. The decision is data-dependent, but the problem with that is that the data right now is all past data. The data doesn’t show real-time momentum. Forward-looking data doesn’t actually exist, but boy, would it be great if it did!
Consumer spending, the bulwark of the economy and the reason we had the very positive (2.9%) year-over-year GDP growth rate in the fourth quarter that was announced yesterday, fell by 0.2% in December from November, the Commerce Department reported today, Friday, January 27. After adjusting for inflation, consumer spending fell 0.3% in the month. Today’s report also adjusted the November figures to show a small drop in consumer spending for November. The initial report for that month showed a slight increase.
The U.S. economy shrank at an annualized pace of 1.6% in the first quarter. The Bureau of Economic Analysis’s third and final estimate of first-quarter GDP released Wednesday, June 29, showed a 1.6% annualized drop in economic growth in the first quarter of 2022. That was slightly worse than the 1.5% decline previously reported.
The projections released by the Federal Reserve on Wednesday, June 15–the so-called Dot Plot–show a central bank that sees a tough 2022, especially on interest rates and inflation, but a definite improvement in 2024. This fits with the developing Wall Street narrative that sees inflation dropping in 2023 and 2024 and the Fed looking to cut interest rates in 2024.
The U.S. economy unexpectedly shrank at a 1.4% annualized rate in the first quarter of 2022, the Bureau of Economic Analysis reported Thursday, April 28. The first quarter results follow on a 6.9% rate in the fourth quarter. Economists had projected a 1% tate of growth for the quarter. But since Wall Street was already expecting a big slowdown in growth for the quarter and because a peek below the headline numbers argued that the lower growth rate would be temporary, stocks surged on Thursday.
The estimate for real GDP growth fell to 0.0% in the first quarter, according to the GDPNow model at the Atlanta Federal Reserve.
In the third quarter, GDP, adjusted for inflation, grew at just 0.5%. That’s down from 1.6% growth in the second quarter. The year over year growth rate came to 2.0%. Economists had forecast year over year growth of 2.6%. As recently as July, economists predicted that the recovery would gain steam in the second half of the year
