January 8, 2017

Atlanta Fed’s Q4 2017 GDP Estimate at Record Low

The Atlanta Fed did downwardly revise its estimate of Q4 GDP as a result of the numbers that were released on Friday.  The downward revision took their estimate from 3.2% down to 2.7%. 2.7% is the lowest the estimate has been since they began estimating 2017 Q4.  In fact, earlier on, in October or November the Atlanta Fed was up to 4.5% for their 2017 GDP. So as the U.S. stock market was rising to an all-time record high the Atlanta Fed was downwardly revising its forecast for Q4 of 2017 to its record low.

Déja Vu All Over Again

Let’s assume that the Atlanta Fed is accurate at 2.7%, maybe they’re still being too optimistic, but let’s say they hit the nail on the head and we get 2.6%. Then the entire year of 2017 would see about 2.5% GDP growth.  Now, how does that compare to Obama?

Half of Obama’s Second Term Beats Trump’s Economic Numbers

Everybody is talking as if the economy is rip-roaring now; it’s so much better not under Trump than it was under Obama’s second term. I’d rather look at the second term because a) it’s closer in time to where we are right now, and b) his first term includes the Great Recession that he inherited. So if you look at Obama’s second term, GDP growth averaged 2.2% for the entire 4 years.  If that’s the case, 2.5% is a little bit better, but if you take 2 of those years, 2014 and 2015, GDP grew by more than 2.5%.  I think we were at 2.56 and 2.9%. In other words, half of Obama’s years as President beat the first year of Trump as far as GDP.

Economic Growth Hasn’t Happened

So to me, 2017 just looks like another year of Obama’s presidency. Nothing’s really different.  2.5% fits in nicely with Obama’s economic numbers.  Everybody is talking about all this great economic growth that’s taking place – it hasn’t happened!

Market Soaring in Spite of Lukewarm GDP

Granted, there are people saying, we haven’t really had the tax cuts yet; the tax cuts don’t take effect until next year. That hasn’t stopped the stock market from soaring – obviously they are looking forward. Maybe the economy has looked forward. Maybe there has been an increase in investment in anticipation of these cuts. Maybe we’ve gotten a lot of the benefit and despite that we’re still only at 2.5%.