Mar 5, 2019

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

Dion Rabouin, author of Markets
Expand chart
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

Protests for George Floyd continue for 10th day

Thousands of protesters march over the Brooklyn Bridge on June 4 in New York City. Photo: Angela Weiss/AFP via Getty Images

All four former Minneapolis police officers have been charged for George Floyd’s death and are in custody, including Thomas Lane, J. Alexander Kueng and Tou Thao, who were charged with aiding and abetting second-degree murder and aiding and abetting second-degree manslaughter.

The latest: Crowds gathered in Portsmouth, New Hampshire on Thursday evening and in Atlanta, Georgia, despite the rain. Atlanta Mayor Keisha Lance Bottoms joined demonstrators on Thursday. Demonstrators in Washington, D.C. dispersed following a thunderstorm and rain warning for the region.

Trump says he will campaign against Lisa Murkowski after her support for Mattis

Trump with Barr and Meadows outside St. John's Episcopal church in Washington, D.C. on June 1. Photo: Brendan Smialowski/AFP via Getty Images

President Trump tweeted on Thursday that he would endorse "any candidate" with a pulse who runs against Sen. Lisa Murkowski (R-Alaska).

Driving the news: Murkowski said on Thursday that she supported former defense secretary James Mattis' condemnation of Trump over his response to protests in the wake of George Floyd's killing. She described Mattis' statement as "true, honest, necessary and overdue," Politico's Andrew Desiderio reports.

2 hours ago - World

The president vs. the Pentagon

Trump visits Mattis and the Pentagon in 2018. Photo: Brendan Smialowski/AFP via Getty

Over the course of just a few hours, President Trump was rebuffed by the Secretary of Defense over his call for troops in the streets and accused by James Mattis, his former Pentagon chief, of trampling the Constitution for political gain.

Why it matters: Current and former leaders of the U.S. military are drawing a line over Trump's demand for a militarized response to the protests and unrest that have swept the country over the killing of George Floyd by police.