After A Disastrous Quarter, Atlanta Fed Now Expects Q2 GDP To Hit 4.3%

Call it deja vu all over again.

Four months after the Atlanta Fed started off its Q1 GDP nowcast at 2.5%, then raised it just shy of 3.5% before eventually closing the books at 0.2%, slightly below where the BEA reported Q1 GDP, moments ago the Atlanta Fed released its initial GDP forecast for Q2, and it will probably not come as a surprise to anyone that it just happens to be a tad optimistic.

According to the regional Fed, best known for its initial euphoria, and subsequent tapering and accuracy, “the initial GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2017 is 4.3 percent on May 1. The advance estimate of first-quarter real GDP growth released by the U.S. Bureau of Economic Analysis on April 28 was 0.7 percent, 0.5 percentage points above the final GDPNow model nowcast released on the previous day.”

And this is how the Fed sees the breakdown in various components:

PCE contribution est. at 2.22%

Nonresidential equipment investment contribution est. at 0.58%

Nonresidential intellectual property products investment contribution est. at 0.17%

Nonresidential structures investment contribution est. at 0.15%

Residential investment contribution est. at 0.32%

Government contribution est. at -0.01%

Net exports contribution est. at -0.15%

Change in inventory investment contribution est. at 0.98%

Well, if the cheerful Fed hopes to be accurate this time around with its initial estimate, US consumers better start spending fast. Then again, if past is prologue, expect this number to end roughly 50% lower in three months when the first advance Q1 GDP report is released.