Atlanta Fed Cuts Q1 GDP Forecast to .2% Real Growth

The Atlanta Fed has revised the Q1 growth rate of real GDP to .2% from the forecast of .5% given slightly over a week ago.

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As their report states:

The final GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2017 is0.2 percent on April 27, down from 0.5 percent on April 18. The forecast of first-quarter real consumer spending growth fell from 0.3 percent to 0.1 percent after yesterday’s annual retail trade revision by the U.S. Census Bureau. The forecast of the contribution of inventory investment to first-quarter growth declined from -0.76 percentage points to -1.11 percentage points after this morning’s advance reports on durable manufacturing and wholesale and retail inventories from the Census Bureau. The forecast of real equipment investment growth increased from 5.5 percent to 6.6 percent after the durable manufacturing report and the incorporation of previously published data on light truck sales to businesses from the U.S. Bureau of Economic Analysis.

The next GDPNow update is scheduled for Monday, May 1st.

Weakness in Inventory Data

A large part of the reason for the revised forecast is due to the inventory components of GDP. As JP Morgan’s Daniel Silver commented in his note earlier:

urning to today’s reports, the flurry of information was a negative for 1Q growth on net, mainly through the inventory components. Wholesale inventories declined 0.1% in March, retail inventories increased 0.4%, and durable manufacturing inventories ticked up 0.1%. These figures continued what has been a weak run for much of the inventory data…

This excerpt was in regards to JP Morgan ($JPM) also cutting its Q1 GDP forecast this morning after the release of more economic data. It should be noted, however, that the short-term pain of the inventory components are likely going to reverse in Q2 which should positively affect that quarter’s real GDP growth.

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