US GDP forecast revised lower by Atlanta FED

Yesterday GDPNow model from the Atlanta Fed showed better growth prospects in Q3 -  forecast increased from 5.1% to 5.3%. Today however, the forecast fell sharply to 3.7% after the release of the trade balance, industrial orders and car sales data. Today’s GDPNow reading  was mainly affected by low business investments in the necessary products like tools, etc., and the exports prospects.

Additionally, it is worth mentioning that Morgan Stanley reduced its growth forecast to 2.9% from 5.3% (however, in Q4 the bank still expects a 6.7% increase). It is worth mentioning that Goldman Sachs and Bank of America also lowered their forecasts.

Why are we writing about it? Despite the fact that the growth looks solid, it may not be enough for the Fed to start reducing the QE program. Therefore, the impact of tomorrow's NFP data is even greater. If it turns out that the businesses actually slowed down employment in anticipation of further restrictions, then the announcement of the start of the tapering process should not be expected.

Sharp decline in GDP forecast from the Atlanta Fed. Source: Fed