Predictions of GDP growth for Q3 are all over the map right now. The Atlanta Fed's GDPNow forecast is currently at an eye-popping 5.8% while the Fed's Open Market Committee is effectively forecasting 0%.¹ Here's the range:
So what's really going to happen? I sure wouldn't bet the ranch on 5.8%, but 0% seems a wee bit pessimistic. Maybe 1.5%?
¹Their latest forecast is 1% growth for the whole year. Since GDP is already up more than that in the first half of the year, this implies zero or slightly negative growth in the second half of the year.
Hasn't the Atlanta Fed been one of the more accurate ones in the last handful of years (or longer)? I thought I remembered a chart here about one of the Feds having a forecast that matched with the actual pretty well?
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But then there is the standard caveat that past performance is no guarantee of future results.
Like the saying goes, economists spend 50% of their time making forecasts and the other 50% explaining why their forecasts were wrong. A "science" so mushy it's practically liquid.
Both the Atlanta and New York Feds use data as it comes in. They continually update the forecast. There is very little data from Q3 to incorporate into their models. That data has so far been very positive, which explains why they are so optimistic. But some reversion to the mean would not be unusual.
Exactly. A quick look at the Atlanta Fed's GDPNow numbers suggests that the average forecast error this many days out from the BEA's advanced estimate of quarterly GDP growth (70 days or so) is around 1.75%.
And by their own reckoning that average error at any given point (days out from the BEA announcement) probably still overstates the model's accuracy because the data series only goes back to Q3 of 2011 and thus doesn't include any official recessions.
That's not to say that the current forecast should be completely discounted. It looks like it's being driven up mostly by good manufacturing construction and retail sales numbers and those aren't nothing. But it wouldn't be a surprise to see it converge towards the average Blue Chip estimate (which itself could be a downward-moving target) as the quarter goes on.
Is it that all of these things reference different kinds of exposures to the international economy?
FOMC Minutes: Staff No Longer Predicts Recession; "Upside Risks to Inflation"
https://www.calculatedriskblog.com/2023/08/fomc-minutes-staff-no-longer-predicts.html?m=1
You'd think these forecasts would cover all the bases.....
Good news, everyone!
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In response to the “China is fucked” here is the proper perspective. It’s not fucked at all. This is what Communist and totalitarian governments do.
https://www.reuters.com/world/china/why-is-china-not-rushing-fix-its-ailing-economy-2023-08-17/
"A perennial fear of the Chinese Communist Party is that it could be overthrown if capitalism and the private economy grow strong enough," said Xu.“
"We may all have to live with a less vibrant economy for a long time," said Xu.
There you go. They don’t care.
Neither, I suppose, will the next Trump administration.
Essentially, the Chinese people are fucked. The CCP, not so much.
There you go. They don’t care.
This overstates things. Of course they care about economic vigor. And that's because declining prosperity could (and likely would) stoke social unrest. The CCP regime prioritizes holding onto power above everything else — everything (including national security and national economic strength). Social peace and order are fundamental qualities the party seeks to ensure because they help solidify the party's control, and when they're absent the scene might be set for a dreaded "color revolution."
So sure, it's certainly the case the CCP regime won't subordinate its plans to retain power to the wishes of investors or capitalists. But that just means—like any other ruling party—they sometimes have to choose among multiple unsavory options when dealing with the myriad problems and challenges faced by all governments. It doesn't mean they'll arbitrarily or casually gut their own economy.