Tags: atlanta | fed | gdp now | economic | growth | prediction

Atlanta Fed Keeps Economic Growth Prediction Below 3 Percent

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Friday, 09 November 2018 04:37 PM

The U.S. economy is continuing to expand at a 2.9 percent annualized rate in the fourth quarter, following the latest economic data, the Atlanta Federal Reserve’s GDPNow forecast model showed on Friday.

This was unchanged the pace for fourth-quarter gross domestic product that Atlanta Fed’s GDP program calculated on November 2.

The nowcast of the contribution of inventory investment to fourth-quarter real GDP growth inched down from -0.05 percentage points to -0.08 percentage points after Friday's producer price index release from the U.S. Bureau of Labor Statistics and Friday's wholesale trade report from the U.S. Census Bureau.

The next GDPNow update is Thursday, November 15.

The Atlanta Fed announced its decision just hours after the government said 

U.S. wholesale prices rose by the most in six years last month, led higher by more expensive gas, food, and chemicals.

The Labor Department said Friday that the producer price index — which measures price increases before they reach the consumer — leapt 0.6 percent in October, after a smaller 0.2 percent rise in September. Producer prices increased 2.9 percent from a year earlier.

Excluding the volatile food and energy categories, core wholesale prices rose 0.5 percent in October and 2.6 percent from a year earlier.

Despite last month's increase, the figures suggest inflation pressures are mostly in check. The year-over-year price increase is lower than it was in the summer, when it topped 3 percent. And oil prices declined in October, which will likely to lower gas costs in the coming months.

Meanwhile, U.S. wholesale inventories gained slightly more than estimated in September, CNBC reported.

The Commerce Department said that wholesale inventories rose 0.4 percent in September, better than the 0.3 percent gain expected by economists surveyed by Refinitiv.

Wholesale inventories gained 0.9 percent in August, the biggest gain for the measurement since November 2016.

The Federal Reserve is keeping a close eye on price changes as it monitors the economy for signs of overheating. The unemployment rate is at a five-decade low of 3.7 percent and companies are raising wages and salaries to attract and keep workers. Average hourly pay rose in October from a year earlier at the fastest pace in nearly a decade.

Companies may have to raise prices to offset the costs of higher pay, which could spur higher inflation. But businesses could also invest in more machinery and software to make their employees more efficient, which would enable them to pay more without raising prices.

Fed policymakers finished a two-day meeting Thursday without changing the short-term interest rate they control. But most economists expect the Fed will hike short-term rates for a fourth time this year when it meets next in December. The Fed has signaled it expects to raise rates three more times next year.

After its meeting Thursday, the Fed issued a statement that suggested it saw little sign that inflation would accelerate beyond its 2 percent target. Consumer prices rose 2.3 percent in September from a year earlier.

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The U.S. economy is continuing to expand at a 2.9 percent annualized rate in the fourth quarter, following the latest economic data, the Atlanta Federal Reserve's GDPNow forecast model showed on Friday.
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Friday, 09 November 2018 04:37 PM
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