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US OUTLOOK/OPINION: GDPNow Eyes Downside GDP Risk But Stronger Consumption

US OUTLOOK/OPINION
USBulletMarketsFixed Income BulletsForeign Exchange BulletsNorth America
  • Consensus sees real GDP growth at 2.6% annualized in today’s Q4 advance release (0830ET) following a strong 3.1% in Q3 and 3.0% in Q2.
  • Being an advance release, it will have the expenditure breakdown but won't have details for GDI or historical revisions for GDP.
  • Yesterday’s Atlanta Fed GDPNow, which has in recent quarters outperformed the median analyst forecast, was revised notably lower in its last estimate for the release from 3.2% to 2.3%.
  • The latest downward revision was driven by what had looked like a small net trade boost to a sizeable drag (from 0.1pp to -0.6pp) after a much larger than expected trade deficit for December and the drag from inventories being scaled up to -0.6pps.
  • The GDPNow model is however pointing to what could look like stronger underlying details, with personal consumption projected at 3.8% annualized (cons 3.2%) for a marginal firming from an already very strong 3.7% in Q3 (strongest since 1Q23).
  • The projected 2.5pp contribution from consumption to real GDP growth drives the 2.8pp for final domestic demand, although the latter would be down from a particularly strong 3.7pp in Q3.  
  • Also, note that whilst Q4 GDP growth of 2.3% annualized would be a dovish surprise to latest expectations, it would still see GDP growth of 2.5% Y/Y in Q4, matching the median FOMC forecast from the December SEP.
  • Turning to the price details, Bloomberg consensus sees the GDP price deflator rising 2.5% annualized in Q4 after 1.9%. Core PCE inflation meanwhile is seen rising 2.5% annualized after 2.2%, which appears consistent with unrounded estimates for core PCE in December averaging slightly below 0.20% M/M. 
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  • Consensus sees real GDP growth at 2.6% annualized in today’s Q4 advance release (0830ET) following a strong 3.1% in Q3 and 3.0% in Q2.
  • Being an advance release, it will have the expenditure breakdown but won't have details for GDI or historical revisions for GDP.
  • Yesterday’s Atlanta Fed GDPNow, which has in recent quarters outperformed the median analyst forecast, was revised notably lower in its last estimate for the release from 3.2% to 2.3%.
  • The latest downward revision was driven by what had looked like a small net trade boost to a sizeable drag (from 0.1pp to -0.6pp) after a much larger than expected trade deficit for December and the drag from inventories being scaled up to -0.6pps.
  • The GDPNow model is however pointing to what could look like stronger underlying details, with personal consumption projected at 3.8% annualized (cons 3.2%) for a marginal firming from an already very strong 3.7% in Q3 (strongest since 1Q23).
  • The projected 2.5pp contribution from consumption to real GDP growth drives the 2.8pp for final domestic demand, although the latter would be down from a particularly strong 3.7pp in Q3.  
  • Also, note that whilst Q4 GDP growth of 2.3% annualized would be a dovish surprise to latest expectations, it would still see GDP growth of 2.5% Y/Y in Q4, matching the median FOMC forecast from the December SEP.
  • Turning to the price details, Bloomberg consensus sees the GDP price deflator rising 2.5% annualized in Q4 after 1.9%. Core PCE inflation meanwhile is seen rising 2.5% annualized after 2.2%, which appears consistent with unrounded estimates for core PCE in December averaging slightly below 0.20% M/M.