The Atlanta Fed GDPNow real GDP forecast for the second quarter stands at exactly 0 percent. So no growth expected. Something economists certainly do not take into account.
The Atlanta Fed GDPNow forecast is a growth forecast based solely on published macro data during the quarter. This differs from the forecasts of most economists, who usually only give one number that may or may not be revised.
The ‹Blue Chip Economic Indicators› consensus forecast of more than 50 US economists is, as the figure above shows, over 3 percent (annualised). There is a yawning gap between the two forecasts.
The beginning
The difference between the economists› forecast and the Atlanta Fed GDPNow forecast can be explained by the amount of available macro data. At the beginning of the forecast period, this amount is of course still limited. As a result, the forecast is more volatile at the start of the period, resulting in potentially large differences with economists› forecasts.
However, with only eight days left in the second quarter, data availability is probably not the problem here. I think it is more likely that we are at the start of a major growth slowdown - which if anything turns into a recession - which has not yet been reflected in economists› growth forecasts.
The Citi Economic Surprise Index for the US, which has fallen well below zero and is at its lowest level since May 2020, underlines this idea. Macro data are coming in widely below expectations.
Enthusiasts
If the Atlanta Fed GDPNow forecast turns out to be correct, it will be almost impossible to meet economists› growth forecast of over 2 percent for 2022. And the Federal Reserve’s recently revised downward expectation of 1.7 percent will also prove too high.
So we have a slowing economy, with an aggressively tightening central bank and equity markets that are not cheap enough. It remains a challenging environment for risky assets.
Jeroen Blokland is founder of True Insights, a platform that provides independent research to build diversified multi-asset portfolios. Blokland was most recently head of multi-assets at Robeco. His «chart of the week» appears every Monday on Investment Officer Luxembourg.