Tags: atlanta | fed | gdp | economy | growth

Atlanta Fed Hikes GDP Estimate to 3.1% Despite Virus Threat

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By    |   Friday, 06 March 2020 02:57 PM

The U.S. economy is likely growing at a 3.1% annualized rate in the first quarter, based on the latest economic data, despite threats from the spreading coronavirus, the Atlanta Federal Reserve said.

The Atlanta Fed’s GDP program late last week estimated a 2.7% pace.

Meanwhile, the New York Fed is less optimistic and cut its forecast by 0.4 percentage point. 

The New York Fed Staff Nowcast stands at 1.7% for the first quarter. "Negative surprises from the ISM manufacturing survey drove most of the decrease," the New York Fed said.

New orders for U.S.-made goods fell more than expected in January and could drop further as a worldwide coronavirus outbreak strains supply chains and undercuts the manufacturing sector, which had recently shown signs of stabilizing after a prolonged slump.

Factory goods orders decreased 0.5% as an increase in demand for machinery was offset by a decline in transportation equipment, the Commerce Department said on Thursday. Data for December was revised slightly up to show orders rising 1.9% instead of rebounding 1.8% as previously reported.

Economists say fiscal stimulus is needed to cushion the economy against the disruptions from the coronavirus, though many are not yet forecasting a recession. Growth estimates for the first half are around 1%, Reuters explained.

Sluggish productivity is one of the reasons the economy has struggled to achieve the Trump administration's target of 3% annual GDP growth. The economy grew 2.3% in 2019, the slowest in three years, after logging 2.9% growth in 2018.

The two central-bank GDP revisions came just hours after U.S. employers maintained a robust pace of hiring in February, giving the economy a strong boost heading into the coronavirus outbreak, which has stoked fears of a recession and prompted an emergency interest rate cut from the Federal Reserve, Reuters explained.

The Labor Department's closely watched monthly employment report on Friday also showed solid wage growth and the unemployment rate falling back to near a 50-year low of 3.5%. Employers also increased hours for workers last month.

But the strong jobs report likely does not capture the impact of the coronavirus, which spread in the United States beginning in late February, leaving financial markets and economists to anticipate severe economic disruptions in the months ahead. Financial markets view the virus, which causes a flu-like illness, as the catalyst that could interrupt the longest economic expansion on record, now in its 11th year.

Meanwhile, a bill signed by U.S. President Donald Trump on Friday will provide $8.3 billion to bolster the country's capacity to test for the fast-spreading new coronavirus and fund other measures to stem an outbreak that has now hit 21 states, with Pennsylvania and Indiana reporting their first cases.

The president signed the legislation, approved by the Senate on Thursday, at the end of a week in which the virus began to disrupt daily life for many Americans, Reuters reported.

In Seattle, the epicenter of the nation's outbreak, there were school closings and orders to work from home. In Miami and Baltimore, areas less affected by the outbreak, music festivals and sporting events were canceled or curtailed as a precaution.

The funds will partly go toward expanding testing capacity, which health officials say is a key slowing the spread of the respiratory illness in the United States.

The U.S. death toll reached 14 by Friday with more than 230 cases. Worldwide, about 100,000 people have been infected and more than 3,400 have died, most of them in China.

Material from Bloomberg and Reuters has been used in this report.

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The U.S. economy is likely growing at a 3.1% annualized rate in the first quarter, based on the latest economic data, despite threats from the spreading coronavirus, the Atlanta Federal Reserve said.
atlanta, fed, gdp, economy, growth
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2020-57-06
Friday, 06 March 2020 02:57 PM
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