Back-to-back hurricanes must be taking their toll on the economy because the Atlanta Fed and the NY Fed are cutting their Q3 GDP forecasts, and the chart-job is jaw dropping…
First the forecast came out from the NY Fed:
The drivers of the collapse are hurricane-impacted data from Industrial production and Retail Sales this morning.
The Atlanta Fed is more lofty at this point, but it is still dropping like a sac of potatoes and is not forecast at 2.2%:
Zero Hedge reminds us of the “hard” data economic surprise index, and Goldman Sachs rubs salt in the wound:
Putting the recent data in context, here is the “Hard” economic data surprise index.
And then, the cherry on top came from Goldman Sachs which just slashed its hurricane-impacted Q3 GDP forecast from 2.0% (it was 2.8% just one week ago) to 1.6%. To wit:
Industrial production fell sharply in August, but the report explicitly indicated that Hurricane Harvey likely contributed the bulk of the decline. University of Michigan consumer sentiment declined a bit less than expected in the preliminary September report, and the survey’s measure of longer-run inflation expectations moved back up to 2.6%. Taken together, today’s real activity data represents strong evidence that hurricanes have significantly reduced the pace of US growth in the third quarter. Accordingly, we revised down our Q3 GDP tracking estimate by four tenths to +1.6% (qoq ar), on top of the -0.8pp revision we made last week.
We believe today’s weaker-than-expected retail sales and industrial production data increase the likelihood of a meaningful drag on August economic activity from Hurricane Harvey. And given the possibility of sustained weakness in September due to Hurricane Irma, we now expect an even larger drag on growth in the third quarter. We are reducing our tracking estimate for Q3 GDP by four tenths to +1.6% (qoq ar), on top of the -0.8pp revision we made last week in anticipation of Hurricane effects. We expect some of this weakness to reverse in the fourth quarter as economic activity rebounds in storm-affected regions.
So – NY Fed Staff Nowcast Q3 2017: 1.34% (Prev. 2.1%); Q4 2017 at 1.83% (Prev 2.6%)
Which means that, if NY Fed is correct, and one adds the actual GDPs of 1.2% in Q1 and 3.0% in Q2, full year 2017 GDP Growth wil be just 1.8%!
Not to worry though, because every too-big-to-fail is completely liquid:
— Bank for Intl Settl. (@BIS_org) September 12, 2017
And when all else fails, blame it on the hurricanes…