Select Page

Amidst all the guessing about what Congress and the President will do this week to head off a possible government shutdown when spending authorization ends on April 28–and all the speculation about how financial markets will react–we should remember that we get important data from the real economy on Friday, April 28 as well. At morning at 8:30 a.m. we get the initial estimate for GDP growth in the first quarter of 2017 from the Commerce Department.

Everyone believes that growth will be weak in the quarter. The question is “How weak?”

The Blue Chip Consensus, which puts together the Blue Chip Economic Indicators and the Blue Chip Financial Forecasts, was looking for growth of about 1.4% as of April 7. The consensus has come down since then and estimates put the Wall Street consensus at just a little above 1% now.

But the Atlanta Federal Reserve Bank’s repeated GDPNow forecast fell to just 0.5% on April 18. That’s the recent end point in a long downward trend that has taken the GDPNow forecast down from 1.2% on March 8, to 0.9% on March 15, and then back up slightly to 1% on March 24, before sinking to 0.5% on April 14.

The financial markets have been willing to look past hard economic data such as slow auto, housing, and retail sales in recent weeks because sentiment and confidence numbers from consumer surveys have stayed strong. I think that the markets will continue to do that if they get something like the 1% GDP growth they now expect. The first quarter is always weak, investors and traders will say. But a substantial miss, something like the Atlanta Fed GDPNow 0.5% growth, is likely to be surprising enough and low enough to shake that confidence in positive sentiment numbers.