One of the more well-recognized Now-Casting data series is the GDPNow series produced by the Federal Reserve of Atlanta. Every day they incorporate economic data releases and update their estimate for GDP growth in the current quarter. GDPNow is a great source of information on the real-time performance of the US economy.
Growth expectations, after bouncing from November 20 through December 3, are again fading. Fourth quarter growth estimates peaked at 2.8% and have retreated to 2.66% as of today.
The most likely explanation is the continued tightening of financial conditions. In this next chart, I overlay the Bloomberg Financial Conditions Index on the GDPNow Forecast. In the last week, as financial conditions deteriorated further, growth estimates slumped.
Digging in to the components of growth, we can see a few things:
- The contribution to growth from personal consumption has actually picked up by about 40bps in the last few weeks.
- The contribution to growth from net exports and inventories will be negative.
- The contribution from fixed investment has dropped by about 30bps in recent weeks.
Part of the drop in the fixed investment contribution is a slowdown in the expected growth rate of capital spending on equipment. This probably is being influenced by the decline in oil prices and trade concerns.