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Even The Fed Admits Recession Looms: Q3 GDP Forecast Slashed To Just 0.7%

Just as we warned earlier - and Goldman subsequently confirmed - the Q2 "stack'em-high" surge in inventories (which has juiced hype hope that America is back, baby!) has consequences. The Atlanta Fed just released its latest forecast for Q3 GDP growth, lowering it to just 0.7%, citing an inventory drag of -2.2 percentage points. The Fed estimate is now 75% below the street's consensus!!

 

 

As The Atlanta Fed explains...

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2015 was 0.7 percent on August 13, down from 0.9 percent on August 6.

 

The previously reported nowcast of 1.0 percent for August 6 was revised down due to a minor adjustment in the method for nowcasting investment in computers and peripherals. Since a week ago, the nowcast for the contribution of inventory investment to third-quarter real GDP growth has declined from -1.8 percentage points to -2.2 percentage points.

 

This decline more than offset an increase in the nowcast of the third-quarter growth rate in real consumer spending from 2.9 percent to 3.1 percent after the release of this morning’s retail sales report from the U.S. Census Bureau.

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Be careful what you wish for... or extrapolate.