Why Atlanta Fed's GDP Forecast Is Crashing

Why Atlanta Fed's GDP Forecast Is Crashing - Fed cartoon 02.01.2016

 

The latest Atlanta Fed forecast for Q1 2016 GDP is now (drumroll please)... 0.6%.

 

That's down from 2.7% in February. Yes, that means the Atlanta Fed has lopped off more than 200 bps from its GDP forecast in a month.

 

Nice.

 

 

Here's a chart of the Atlanta Fed's latest hatchet job:

 

 

According to the Atlanta Fed, the estimate's recent decline, from 1.4% to 0.6%, was the result of revised down consumer spending growth and the added drag of declining net exports:

 

"The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2016 is 0.6 percent on March 28, down from 1.4 percent on March 24. After this morning's personal income and outlays release from the U.S. Bureau of Economic Analysis, the forecast for first-quarter real consumer spending growth fell from 2.5 percent to 1.8 percent. The forecast for the contribution of net exports to first-quarter real GDP growth declined from –0.26 percentage points to –0.52 percentage points following this morning's advance report on international trade in goods from the U.S. Census Bureau."

 

As Hedgeye Senior Macro analyst Darius Dale points out, the tracking error of the Atlanta Fed's forecast is a shocking 252 bps.

 

 

Hedgeye U.S. Macro analyst Christian Drake offers some critical context on the methodology underpinning the Atlanta Fed's estimate:

 

 

 

How useful is that? Not very.

 

On a related note, Hedgeye's Macro team has nailed the last five U.S. GDP numbers. Our current estimate?

1.0%


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