Sep 16, 2020 - Economy & Business

Fed expectations for Q3 GDP stall and diverge

The latest real-time Fed estimates of U.S. GDP from the New York and Atlanta Fed "nowcasting" models both show the economy’s momentum has slowed over the summer, but diverge widely.

By the numbers: The Atlanta Fed's model has jumped thanks largely to better-than-expected readings on Institute for Supply Management (ISM) manufacturing and services sector and government GDP and employment data.

  • The New York Fed's model put less emphasis on the ISM surveys, which track sentiment rather than hard numbers.
  • The New York Fed's forecast also puts greater emphasis on import and export data, which is particularly negative for the U.S. as it has had to import an increasing amount of goods from China, where most of the medical equipment needed to deal with the coronavirus pandemic is made.

The big picture: After GDP declined by 32% in the second quarter, the most in history, growth is expected to bounce back strongly in the third.

Between the lines: The Atlanta Fed notes that a collection of forecasts from "blue chip" economists estimates Q3 GDP at just over 20%.

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