Our "Lower-For-Longer" Call? Validated Again With Lousy GDP Report

Our "Lower-For-Longer" Call? Validated Again With Lousy GDP Report - GDP cartoon 05.29.2015


That malodorous odor you're smelling? Today’s Q3 U.S. GDP report which came in much weaker than consensus expected. Their sanguine projections (though dramtically reduced over the past three months) proved to be too high yet again.


Spoiler alert #1 > We got it right.


The Bureau of Economic Analysis’ first estimate for third quarter GDP was 1.5% quarter-over-quarter and 2% year-over-year. That was at the high end of the range we had forecasted of 0.1% to 1.5%. For those keeping score, we’ve been right about GDP for three quarters in a row now. (To read our analysis of Q1 and Q2 GDP estimates click here and here.)


Wall Street's track record? Not so good.


Check out the chart below showing consensus GDP estimates. See how the projections slowly trickled up at the beginning of the year, before the drop to 2%, back in August.


*Still too high*


Our "Lower-For-Longer" Call? Validated Again With Lousy GDP Report - 10 29 2015 Bloomberg consensus


You can read today's news analyzing, ad nauseam, what happened during the quarter. (Quickly: investments and net exports were a drag on the economy, government expenditure was a tiny net positive and consumption contributed almost all of the gains.)


More importantly, here’s what you need to know heading into Q4 2015.


Spoiler Alert #2 > It's not looking good.


As our macro analyst Darius Dale pointed out on The Macro Show this morning, the batch of recent economic data has turned red. The omnipotent central planners at the Fed acknowledged as much yesterday... opting to remove global economic concerns from its statement, while punching up language related to issues here at home.


Here's the side-by-side comparison of the Fed statements:

Our "Lower-For-Longer" Call? Validated Again With Lousy GDP Report - 10 29 2015 consensus taper 


(To read Hedgeye's compendium of bearish economic readings check out our post "U.S. Economic Data Flashed Trouble Ahead.") 


Furthermore, consumption, the one bright spot in this quarter's GDP report, is slowing. Also on The Macro Show today, U.S. Macro analyst Christian Drake pointed to a historical chart which suggests consumption peaked in 1Q 2015.  


Our "Lower-For-Longer" Call? Validated Again With Lousy GDP Report - 10 29 2015 hedgeye consumption


Given this bearish setup heading into the year-end print, you may be wondering: What are our GDP estimates for Q4 2015?


Join us and we'll keep you well ahead of the consensus.

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