To those of you that read Part 1 within the thesis category, you may have been aware that I believed that GDP had a higher than anticipated probability to weaken due to the difficulty in quantifying behavioral variables within the economy. The timestamp on the article is less than perfect due to a need to recategorize within the website. Anyways, as anticipated the sobering reality is upon us. Below, you will notice that the Atlanta Fed GDPNow estimate has plummeted from its 2.6%-2.8% range to 1.5%.
Also, below you will notice that the Q1 2019 GDP forecast out of the New York Fed has fallen from about 2% to 1.08%.
These moves may seem small in nominal terms, but the point is always to consider the move in percentage terms. The forecast cut out of the Atlanta Fed means that Q4 2018 GDP will be about 44% lower than previously expected. The forecast cut out of the New York Fed means that Q1 2019 GDP will be about 5o% lower than previously expected. It continues to perplex me that the market can be so complacent on the news. Despite the news, the U.S. equity market remains up about 2-3% in February. The official release for Q4 2018 GDP will be on the 28th of this month. The release was delayed due to the government shutdown. This is quite the learning experience for how the markets react ahead of what can very well be tough times ahead.