The three Fed district bank GDP nowcasts for the first quarter 2024 are fairly consistent in anticipating the advance estimate of real GDP set for release at 8:30 ET on Thursday, April 25. At 2-3 weeks from the release date, nowcasts tend to be set with little chance of much change. At this point the forecasts include the all-important employment report for all three months of the quarter.
The most reliable of the three forecasts is the Atlanta Fed’s GDPNow which looks for growth of 2.4 percent in the first quarter. This measure has a solid correlation of 0.980 with the advance estimate based on a history from July 2014 to the present. The St. Louis Fed Real GDP Nowcast has more history from April 2013 to the present, but a weaker correlation of 0.752. This measure anticipates an increase of 1.4 percent in first quarter GDP. The New York Fed’s Staff Nowcast looks for an increase of 2.25 percent in the first quarter. It has a good correlation of 0.803 but this is based on a short history from April 2023 after the New York Fed revamped its forecast methodology. An average of the three nowcasts puts growth at 2.02 percent for first quarter GDP in 2024 and has a correlation of 0.956, making this a reasonable forecast.
Although growth is expected to moderate substantially from 3.4 percent in the fourth quarter and 4.9 percent in the third quarter, an increase along the lines of 2 percent is actually close to the FOMC’s longer-run forecast of 1.8 percent. As such, if the forecast is realized, it suggests that the US economy is growing at a healthy and sustainable pace.
Growth of around 2 percent in the first quarter combined with recent strong employment numbers and a more attenuated outlook for improvements in inflation will help keep Federal Reserve monetary policy restrictive and rates on hold for a little longer than previously thought. Anticipation of a rate cut is moving back from June to September; moreover, the expected number of rate cuts is being shaved from three 25-basis-point moves to perhaps two this year. The FOMC next won’t update their own quarterly forecasts until the deliberations at the June 11-12 meeting.
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