Mar 5, 2019

Goldman Sachs: First quarter of 2019 is a "GDP pothole"

Data: Federal Reserve Bank of Atlanta; Chart: Axios Visuals
Data: Federal Reserve Bank of Atlanta; Chart: Axios Visuals

The Atlanta Fed's GDPNow model is known for predicting GDP readings that start out exceedingly high and eventually recoil back to trend.

But Monday's reading shows expectations for just 0.3% growth in the first quarter of 2019. It followed a weak U.S. construction spending report that badly missed expectations.

The big picture: Since the Tax Cut and Jobs Act was signed into law on Dec. 22, 2017, the metric has largely trended upward, but has fallen significantly since the beginning of the third quarter in 2018.

  • Keep in mind: "GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available data for the current measured quarter," the Atlanta Fed notes. "There are no subjective adjustments made to GDPNow — the estimate is based solely on the mathematical results of the model."

What to watch: Goldman Sachs analysts estimate GDP will come in at 0.9%, calling the first quarter a "GDP pothole."

  • What they're saying: "While this would mark a significant deceleration, we expect much of this weakness to reflect temporary factors likely to shift growth to Q2," analysts said in a note to clients. They highlighted 3 key factors: "residual seasonality, the government shutdown, and tax refund delays."

Go deeper: The U.S. economy grew 2.9% in 2018

Go deeper