Recovery! The mantra of the Federal Reserve and mainstream pundits parroting the party line. But it appears that like poll numbers given prior to Presidential elections, when all the votes are counted, what was forecast for months leading up to the end of a cycle was much different than the actual outcome.
For most of 2015 the Fed and big bank analysts predicted an annual GDP growth rate between 2.5 - 3%. But a new report published on Jan. 4 by the Atlanta Fed shows that not only is GDP growth looking to be below 2% for last year, but it will be as much as six bps below the dreadful number that ended 2014.
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2015 is 0.7 percent on January 4, down from 1.3 percent on December 23. The forecast for the contribution of net exports to fourth-quarter real GDP growth fell 0.1 percentage points to -0.4 percentage points on December 29 after the U.S. Census Bureau’s advance report on international trade in goods. The now cast for real GDP growth fell 0.5 percentage points this morning following the Census Bureau’s release on construction spending and the Institute for Supply Management’s Manufacturing ISM Report On Business.
Said otherwise, according to the Atlanta Fed, Janet Yellen launched a rate hike cycle in a quarter when GDP will be just 0.7%, and which when averaged across the prior 3 quarters, would mean that the US will have grown at just 1.8% in 2015, a 25% drop from the 2.4% GDP growth in 2014.
I think even George Orwell would have a difficult time spinning these numbers to validate the economy as being in ‘recovery’.
Either way, 2016 is off to a roaring start, with markets in China, Germany, and the U.S. all down at potentially historic levels to start the year. And in fact, if the Dow closes at its current level of -416 points, it will be the worst first market day of the year since the beginning of the Great Depression, 84 years ago.
Kenneth Schortgen Jr is a writer for Secretsofthefed.com, Examiner.com, Roguemoney.net, and To the Death Media, and hosts the popular web blog, The Daily Economist. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.