Down, down, down. That seems to be the general direction of the Atlanta Federal Reserve’s running forecast for US economic growth in the first quarter, which is now pointing to the weakest growth pace in three years.
The regional Fed branch now reckons the economy grew at an annualised pace of just 0.6 per cent in the first three months of this year, down from its previous forecast on Wednesday of 0.8 per cent. That would compare with 2.1 per cent in the final quarter of 2016 and mark the slowest rate of growth since the first quarter of 2014, according to commerce department data.
The so-called GDPNow forecast was lowered as a result of factors including disappointing data on US auto sales, services sector employment growth and March jobs data, which were all released this week. Those elements hit estimates for growth in consumption and investment in business equipment.
Numerous investment banks have noted recently that there has been a growing divergence between survey data, that showed high levels of optimism, and more tempered hard data that have painted a mixed picture.
And indeed, Wall Street banks offer differing views on on the topic. The consensus forecast in a Bloomberg survey is still pointing to a 2.5 per cent growth rate in the first quarter.
Goldman Sachs economists said last month that part of the disconnect is probably driven by differences in the interpretation of “temporary factors, such as Chinese New Year timing and delayed tax refunds”.
“A hallmark of the GDPNow forecasting methodology is its avoidance of subjective adjustments, but in this instance we believe some role for judgment is warranted, particularly with regard to the international trade assumptions,” they note.