Economy | timiacono.com - Part 4

Q2 GDPNow Now Available

Much is being made about how yesterday’s report of a widening U.S. trade deficit in March has pushed first quarter economic growth into negative territory, from a rate of +0.2 percent to somewhere around -0.5 percent (subject to further revisions).

Naturally, analysts think things will improve as we head toward summer, but it’s worth looking at what the Atlanta Fed’s GDP Now measure has to say about Q2 growth, seeing as they nailed it in Q1 as noted here last week.

Of course, there’s not a whole lot of data available for the second quarter yet – the April ISM Manufacturing Index is about it as far as I can tell from the Atlanta Fed website.

Nonetheless, their forecast is based on something, rather than the perpetually optimistic outlook from most economists and other analysts in the “Blue Chip consensus” who, collectively, missed the Q1 growth rate by a country mile.

Greekovery

Add the title above to the growing list of oddly amusing new words prompted by the ongoing crisis in Greece though, from the looks of the graphic below from this story at the Telegraph, they may be a bit premature.

Though Ireland appears to have pulled back from the abyss, never to return, the Italian economy is not looking so hot these days along with Cyprus that, until their own crisis a few years back, was flying (relatively) high.

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The Fed/Dollar/Oil Menage a Trois

More evidence of the outsized impact that traders have on the financial world and, as a result, the lives of billions of people on the planet, comes via recent developments in the U.S. economy, signals from the Fed, the trade-weighted dollar, and energy prices.

Yesterday’s stinker of a GDP report and the recent central bank caution about raising interest rates compelled traders to hit the sell button on their U.S. dollar positions and the greenback went tumbling from its recent perch, a trend that seems likely to continue.

Of course, energy traders saw the falling dollar and hit the buy button on oil futures so, now, all of a sudden bottom-calling for  crude oil prices is back in fashion.

Obviously, there are other important factors involved in the 50 percent plunge in oil prices since last summer (i.e., shale oil, Saudi policy), but the 25 percent strengthening of the U.S. currency was a big factor as commodity traders are like Pavlov’s dogs when it comes to the value of the world’s reserve currency relative to its freely traded rivals.

Atlanta Fed’s GDPNow Nails Q1 GDP

A screenshot of first quarter U.S. economic growth was quickly grabbed from the Atlanta Fed’s GDPNow page as they will soon switch over to estimating economic activity for the second quarter, but they really did a bang-up job for the first three months of the year.

They’ve had the Q1 GDP growth rate at about 0.25 percent for some time now as analysts have repeatedly revised their forecasts lower.  The government said today that their first estimate of first quarter growth is 0.2 percent, far below analysts’ estimate of 1.0 percent.

Market reaction to this news along with whatever it is Federal Reserve officials have to say at the conclusion of their policy meeting today should be fun to watch, the operative question being whether “bad news is still good news” for stock prices.

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