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Atlanta Fed Now Sees Q4 GDP At Blistering 4.5%

True to form, the Atlanta Fed - which has a habit of overshooting massively at the start of the quarter based on optimistic estimates only to ease sharply lower on its GDP "nowcast" as the "hard" data comes in - has unveiled its latest Q4 GDP estimate , which the regional Fed expects to print at a blistering 4.5%. The number is more than 50% higher the previous Q4 guesstimate of 2.9%.

Why the surge? The Atlanta Fed looked at today's mfg ISM report and effectively doubled its forecast for real consumer spending growth and real private fixed investment growth increased from 2.8% and 4.4% , respectively, to 4.1%  and 8.8%, respectively. Breaking down the estimate, which was boosted by excess hurricane-related spending, by its constituent components:

  • Latest release affecting the model was ISM manufacturing, construction spending
  • PCE contribution est. at 2.80%
  • Nonresidential equipment investment contribution est. at 0.95%
  • Nonresidential intellectual property products investment contribution est. at 0.18%
  • Nonresidential structures investment contribution est. at -0.08%
  • Residential investment contribution est. at 0.37%
  • Government contribution est. at 0.31%
  • Net exports contribution est. at -0.20%

Here is the commentary:

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2017 is 4.5 percent on November 1, up from 2.9 percent on October 30. The forecasts of real consumer spending growth and real private fixed investment growth increased from 2.8 percent and 4.4 percent, respectively, to 4.1 percent and 8.8 percent, respectively, after this morning's Manufacturing ISM Report On Business from the Institute for Supply Management. The model's estimate of the dynamic factor for October—normalized to have mean 0 and standard deviation 1 and used to forecast the yet-to-be released monthly GDP source data—increased from 0.04 to 1.43 after the ISM report.

If accurate, this would be the highest pace of economic growth since Q3 2014, and the fourth highest quarterly GDP number since the financial crisis.

We now await to see if the forecast from the New York Fed will validate this euphoric projection.