Back Economics

NY and Atlanta agree on GDP

Published on March 26, 2024

Gerard MacDonell

With the flow of important data having ebbed for a bit, and with not much change of the macro story I would tell, it may be appropriate to continue weighing in on others’ research. Today’s observation is that the New York Fed and Atlanta Fed seem to agree that GDP growth has decelerated to around trend in the first quarter.

To the extent that the two regional banks provide detail on the components of demand, it looks as though most of the deceleration is (believed to be) due to the end of the earlier consumer spending boom, which fits neatly with what I have noted. And away from that, there looks to be a minor technical drag from developments in net exports and inventories. Perhaps the tracking for final domestic demand is just marginally above trend, although this stuff is not sufficiently precise to emphasize that much. The broader pattern here fits with tentative evidence that economic surprise has turned slightly lower recently.

Even early-quarter GDP guesses should be described more as estimates than projections, given the smoothing involved in the GDP growth calculation, which introduces a lag. (At this point the data flow is driving Q2 more than Q1.) The New York Fed’s estimate for Q1 peaked at around 3 ¼% (ar) in late January and early February and has since fallen to 1.9%, as of March 22.

A graph showing the growth of a stock market

Description automatically generated — *Source: NY Fed, as linked above*
*Estimate is as of March 22.*

The Atlanta Fed’s estimate peaked at about the same time, although a slightly higher and for a briefer period. It has recently fallen to 2.1% as of their March 26 look.

A graph of a graph showing the growth of the us dollar

Description automatically generated with medium confidence — *Source: Atlanta Fed as linked above*
*Estimate is as of March 26.*

Slower real side growth weakens the case for being short rates here, particularly given the recent sell-off in money market futures, which has largely held. I don’t mean to be sucked into an obsession with one aspect of the macro story. But on this front, for now, I am watching. I would just point out that there is little reason to believe that the Fed is targeting above-trend GDP growth. The dovish point is that they are no longer targeting below-trend growth, because the inflation backdrop looks less alarming than it did 12 or even six months ago.

Separately, I agree with Fed Chair Powell that there is little evidence that things are falling to pieces as we speak. And I admit to being puzzled by his recent emphasis on downside risks.

DISCLOSURES AND DISCLAIMERS

Analyst Certification

The analyst, 22V Research Group, primarily responsible for the preparation of this research report attests to the following: (1) that the views and opinions rendered in this research report reflect his or her personal views about the subject companies or issuers; and (2) that no part of the research analyst’s compensation was, is, or will be directly related to the specific recommendations or views in this research report.

Analyst Certifications and Independence of Research.

Each of the 22V Research analysts whose names appear on the front page of this report hereby certify that all the views expressed in this Report accurately reflect our personal views about any and all of the subject securities or issuers and that no part of our compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views of in this Report.

22V Research (the “Company”) is an independent research provider. The Company is not a member of the FINRA or the SIPC and is not a registered broker dealer or investment adviser. 22V Research has no other regulated or unregulated business activities which conflict with its provision of independent research.

22V Research, LLC is a professional services and independent publication organization. 22V Research, LLC is not a securities broker-dealer, not a member of the Financial Industry Regulatory Authority (FINRA), not a registered investment advisor (RIA) and not a member of SIPC.

Securities transactions, when offered, are offered by 22V Securities, LLC through LPS Capital, LLC. Certain employees of 22V Securities, LLC are dually registered as securities representatives of LPS Capital, LLC or Analyst Hub Securities, LLC. 22V Securities, LPS Capital and Analyst Hub Securities are members FINRA, SIPC.

https://brokercheck.finra.org/

Current Ratings Definition.

SECTOR OUTPERFORM: An “outperform” rating anticipates the company will outperform the S&P Regional Banking Index (peer group).

SECTOR PERFORM: A “market perform” rating anticipates the company will perform in line with the S&P Regional Banking Index (peer group).

SECTOR UNDERPERFORM: An “underperform” rating anticipates the company will underperform the S&P Regional Banking Index (peer group).

Limitation Of Research And Information.

This Report has been prepared for distribution to only qualified institutional or professional clients of 22V Research Group. The contents of this Report represent the views, opinions, and analyses of its authors. The information contained herein does not constitute financial, legal, tax or any other advice. All third-party data presented herein were obtained from publicly available sources which are believed to be reliable; however, the Company makes no warranty, express or implied, concerning the accuracy or completeness of such information. In no event shall the Company be responsible or liable for the correctness of, or update to, any such material or for any damage or lost opportunities resulting from use of this data. Nothing contained in this Report or any distribution by the Company should be construed as any offer to sell, or any solicitation of an offer to buy, any security or investment. Any research or other material received should not be construed as individualized investment advice. Investment decisions should be made as part of an overall portfolio strategy and you should consult with a professional financial advisor, legal and tax advisor prior to making any investment decision. 22V Research Group shall not be liable for any direct or indirect, incidental or consequential loss or damage (including loss of profits, revenue or goodwill) arising from any investment decisions based on information or research obtained from 22V Research Group.

Reproduction And Distribution Strictly Prohibited.

No user of this Report may reproduce, modify, copy, distribute, sell, resell, transmit, transfer, license, assign or publish the Report itself or any information contained therein. Notwithstanding the foregoing, clients with access to working models are permitted to alter or modify the information contained therein, provided that it is solely for such client’s own use. This Report is not intended to be available or distributed for any purpose that would be deemed unlawful or otherwise prohibited by any local, state, national or international laws or regulations or would otherwise subject the Company to registration or regulation of any kind within such jurisdiction.

Copyrights, Trademarks, Intellectual Property.

22V Research Group, and any logos or marks included in this Report are proprietary materials. The use of such terms and logos and marks without the express written consent of 22V Research Group is strictly prohibited. The copyright in the pages or in the screens of the Report, and in the information and material therein, is proprietary material owned by 22V Research Group unless otherwise indicated. The unauthorized use of any material on this Report may violate numerous statutes, regulations and laws, including, but not limited to, copyright, trademark, trade secret or patent laws.