[The following is taken from the MNI Fed Preview, see here]
- GDP growth still looks set for a resilient Q1 after surging in 2H23, although trackers have lost some of their shine from earlier in the quarter. Consumption and specifically retail sales have played a sizeable role here.
- The January retail sales saw a large miss along with downward revisions and was then compounded by a similar story in February.
- Business surveys meanwhile were mixed, with both ISM manufacturing and service indices beating expectations in January before missing in February. Whilst a relatively small miss for services, it was accompanied by heavy declines in prices paid and employment vs a strong increase for new orders.
- The upshot is that the Atlanta Fed’s GDPNow tracker, which in recent quarters has outperformed analyst estimates, stands at 2.3% annualized for Q1 [since lowered to 2.1]. If accurate it would follow two quarters averaging 4.0% annualized in 2H23 [and be close to the] 2.15% averaged in 1H23 as growth continues to come in more resilient than prior forecasts.
- The booming growth into the tail end of 2023 meant that 4Q23 GDP growth of 3.1% Y/Y (prior to any further revisions) overshot the FOMC’s median forecast of 2.6% made as recently as the December SEP. If the 2.3% Atlanta Fed GDPNow estimate is accurate for Q1 it would see GDP starting the year at 3.1% Y/Y.
- The December forecast then saw GDP growth of 1.4% Y/Y in 4Q24, which like core PCE could see some upside risk for the upcoming March forecast round.
