NY Fed model significantly lowers the GDP forecast

According to the latest result of the quantitative model developed by the NY Fed, GDP in the US for the first quarter is expected to amount to 6.3% compared to the previous forecast of 8.6%. This is the result of very large negative contributions from industrial production, capacity utilization, and retail sales. Interestingly, the huge positive surprise from the Philadelphia Fed index added a positive contribution of only 0.04%. It is worth mentioning that the Atlanta Fed's GDP model currently shows growth in Q1 of 5.7%. On the other hand, the tendency of Fed forecasts shows that the increase should reach levels between 5.8% and 6.6%. Therefore, it cannot be said that it is very bad. On the other hand, the stagflation scenario, i.e. economic stagnation accompanied by high inflation, seems to be more and more likely. This is one of the worst-case scenarios given the still high uncertainty surrounding the pandemic.

As one can see, we have the biggest negative and absolute revision since the beginning of the publication of forecasts for Q1. Source: NY Fed