GDPNow Forecasts the Economy Shrank by a Record 42%

Mish

GDPNow estimates the US economy shank by 42.8%. The New York Fed Nowcast is -31.1%

Following dismal economic reports, the GDPnow model forecast is -42.8%.

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2020 is -42.8 percent on May 15, down from -34.9 percent on May 8. After this week's data releases from the U.S. Department of the Treasury's Bureau of the Fiscal Service, the U.S. Bureau of Labor Statistics, the Federal Reserve Board of Governors, and the U.S. Census Bureau, the nowcasts of second-quarter real personal consumption expenditures growth and real gross private domestic investment growth decreased from -33.9 percent and -62.8 percent, respectively, to -43.6 percent and -69.4 percent, respectively.

GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model. In particular, it does not capture the impact of COVID-19 beyond its impact on GDP source data and relevant economic reports that have already been released. It does not anticipate the impact of COVID-19 on forthcoming economic reports beyond the standard internal dynamics of the model.

It's important to know this is an annualized number. The actual decline will be aout 1/4 of the headline number. Even still, expect a new record.

No V-Shaped Recovery

As noted earlier today Industrial Production Declines Most in 101 Years

And  Retail Sales Plunge Way More Than Expected

Helicopter Drop

In response to the crumbling economy, the Fed is promoting a helicopter drop of money. 

For details, please see Panic Sets In: Fed Promotes More Free Money

Mish

Comments (44)
No. 1-11
Gman007
Gman007

Certainly need the money to service debt in the absence of production...

The trick of it though...it has to actually be "free"...and not more debt obligations. And has to get to those that need it the most.

Best solution is a jubilee...but the monkey isn't likely to let go of the rice in the coconut after spending a 100+ years getting to this point.

Tony Bennett
Tony Bennett

Likely the nadir for Q2 estimates.

As country opens up in May and June the only way is UP.

Q2 will still be bad ... just not THAT bad.

The tell will be how will H2 look? Put me down for flat line-ish growth as credit tightens + business folds.

ToInfinityandBeyond
ToInfinityandBeyond

And yet the DOW, S&P and NASDAQ are now all up for the day. Maybe I need to start drinking the Kool Aid.

numike
numike

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Carl_R
Carl_R

Too much money in the economy, and it has to go somewhere, so the stock market is where a lot of it ends up. It should be interesting to see how high the PEs go, though. 40? 60?

Casual_Observer
Casual_Observer

The numbers arent surprising given all economic activity was shutdown. The checkmark recovery is happening. We will look back on April as the bottom.

BrainDamagedBiden
BrainDamagedBiden

The world economy was set to crater anyways. This Covid response is likely to push it into a depression. Helicopter money may be coming but I suspect we will all wish we were Preppers before this thing is over.

Jdog1
Jdog1

It appears we have entered the 4th turning......

Montana33
Montana33

The economy is horrible and it won't get much better when it "opens" because too many people (like me) are scared to go anywhere and most of us want to save some money to pad the bank account so we won't be buying much. So I think you're right Mish that this will go on for a very long time. I know the stock markets are stable to up because no one wants to fight the Fed, but it is weird. I don't want to fight the Fed either. I learned during the Financial Crisis that the Fed will do anything to pump up asset prices.

Sechel
Sechel

JC Penny just declared bankruptcy. The shutdown is only the catalyst. The retailer has been struggling for years. Current crisis is in many cases shutting down businesses that would have failed anyway just not as quickly. Brick and mortar has been struggling for years. American auto industry has many problems. They just limp from crisis to crisis.

killben
killben

"In response to the crumbling economy, the Fed is promoting a helicopter drop of money"

The invisible tyrant of the world is the Fed, the arsonists who are masquerading as firefighters. Maybe we need a facebook group to bring them into the open and...


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