GDP 2 Quarter Forecast Surges

https://deepnewz.com/economics/atlanta-fed-raises-q2-gdpnow-forecast-to-4-6-amid-10-income-growth-1-2-inflation-deeb563a
Atlanta Fed Raises Q2 GDPNow Forecast to 4.6% Amid 10% Income Growth, 1.2% Inflation, and Halved Trade Deficit

*The Atlanta Federal Reserve’s GDPNow model for the second quarter of 2025 has been revised upward to a 4.6% annualized growth rate, a notable increase from the previous estimate of 3.8%. This forecast significantly exceeds the consensus estimate of 1.4%. The surge in projected GDP growth is attributed to robust consumer spending supported by strong jobs and wages, increased business investment, and volatile data in trade and inventories that have distorted earlier readings. Additional economic indicators show personal income growing at an annualized rate of 10%, inflation falling to 1.2%, and the *U.S.trade deficit shrinking by half. Despite these positive trends, the Federal Reserve has maintained high interest rates. Observers note that these improvements have occurred without intervention from Congress or changes in Federal Reserve policy.

  1. good trade deficit result
    2)interest rates are not that high except when compared to recent ultra low rates.
    Cutting interest rates would result in higher inflation.

If the above occurs, methinks stock markets rises.

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And a month ago, on May 6th, the forecast was 2.2%. It may take awhile to get to a recession.

DB2

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Is it? Imports were frontloaded into the 1st quarter so they are way down as expected. Absent that, a lower trade deficit in and of itself is not a good thing unless our exports are improving.

Latest bit of data show anemic increase in exports:

Most shocking data above is the massive increase in personal income. I would like to better understand what is fueling that - and while it is generally great news it is also inflationary which means rates are less likely to come down any time soon.

Edit: The above link in the OP has been updated and it removed the claim of 10% increase in personal income - and there is no record of that quote or data from gdpnow.gov so perhaps it was wrong and has been retracted?

I think I see what they did:

The increase in April is in no way indicative of the annual rate. You can’t take a single month and extrapolate for the entire year - which is why it was probably retracted.

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The increase in personal income in April reflected increases in government social benefits to persons and in compensation.

The increase in government social benefits to persons was led by an increase in Social Security payments, reflecting payments associated with the Social Security Fairness Act.

The increase in compensation was led by private wages and salaries, based on data from the Bureau of Labor Statistics (BLS) Current Employment Statistics (CES). Wages and salaries in services-producing industries increased $53.1 billion. Wages and salaries in goods‑producing industries decreased $3.1 billion.

DB2

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April real PCE was 0.1% vs March.

I didn’t realize 1.2% annualized is “robust.”

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PCE is a measure of inflation, not spending. Consumer spending was up 0.7% in March and 0.2% in April.

https://www.reuters.com/business/us-consumer-spending-slows-april-inflation-rises-moderately-2025-05-30/

PCE is “personal consumption expenditures,” a measure of consumer spending

Real PCE is an inflation adjusted measure of PCE

PCE Price Index measures inflation in PCE

In reply to myself:

Imports decreased by a record 16.3% to $351.0 billion in April. Goods imports slumped by a record 19.9% to $277.9 billion.

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