2026-01-29 16:46:00
Some of the dumbest people in the world have been running around touting the 5.4% forecast from the Atlanta Fed as if it was a real economic number.
Even Fed Chair Jerome Powell had to throw cold water on it yesterday, highlighting that Q1 GDP was negative and that the US was on track for 2-3% GDP growth this year.
What made the cheerleading particularly preposterous is that it was based on thinned out US economic data due to the US government shutdown. It was also highly leveraged to a one-month improvement in October trade balance.
Guess what? That month-month reversed in November and suddenly the GDP forecast is down to 4.2%.
US goods trade balance
Now I think it will still be a good quarter but we also need to wait on inventory data. The correlate to lower imports is often inventory drawdowns and that’s often a big drag on GDP forecasts that’s also not (yet) in the GDPNow estimate. Moreover, if we get a December trade balance number like the latest one, we’ll be on a 3-handle.
Here’s the Atlanta Fed:
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2025 is 4.2 percent
on January 29, down from 5.4 percent on January 26. After this
morning’s releases from the US Census Bureau and the US Bureau of
Economic Analysis, an increase in the nowcast of fourth-quarter real
gross private domestic investment growth from 6.4 percent to 7.1 percent
was more than offset by decreases in the nowcasts of fourth-quarter
personal consumption expenditures growth from 3.2 percent to 3.1 percent
and the contribution of net exports to fourth-quarter real GDP growth
from 1.88 percentage points to 0.65 percentage points.
The next update is due Monday.
