The Federal Reserve Bank of Atlanta predicts first-quarter gross domestic product (GDP) growth of 2.7%.
"The initial GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2020 is 2.7% on January 31," the publication read. "The initial estimate of fourth-quarter real GDP growth released by the U.S. Bureau of Economic Analysis on January 30 was 2.1%, 0.4 percentage points above the final GDPNow model nowcast released on January 29," the Atlanta Fed said Friday.
However, the Federal Reserve Bank of New York isn’t as optimistic.
The New York Fed’s GDP Nowcast fell to 1.5% for first quarter of 2020 from 1.7%.
“Yesterday’s advance estimate from the Commerce Department of real GDP growth for 2019:Q4 was 2.1%. The latest New York Fed Staff Nowcast was 1.2%,” the Federal Reserve Bank of New York said in its latest Nowcasting Report.
“The New York Fed Staff Nowcast stands at 1.5% for 2020:Q1,” the publication further read. “News from this week’s data decreased the nowcast for 2020:Q1 by 0.2 percentage point. Negative surprises from manufacturing data accounted for most of the decrease,” the New York Fed said.
The U.S. economy grew at a moderate 2.1% rate in the final three months of 2019, capping a year when growth slowed significantly due to a weaker global economy and trade war uncertainties.
The Commerce Department reported Thursday that the fourth quarter increase in the gross domestic product, the economy’s total output of goods and services, matched the 2.1% gain of the third quarter. Both quarters were well below the 3.1% surge seen in the first quarter.
For the October-December quarter, growth was supported by solid but slower consumer spending and an improvement in the trade deficit. Those factors offset a further drop in business investment in new plants and equipment and a slowdown in restocking store shelves, the Associated Press explained.
For the whole year, GDP increased 2.3%, the weakest performance in three years and a slowdown from a 2.9% gain in 2018 when the economy got a boost from President Donald Trump’s tax cuts and billions of dollars in increased government spending.
Economists look for even slower growth in 2020 of around 1.8%. But that outcome could be threatened by various threats from a spreading coronavirus in China to a flare-up in trade tensions between the United States and China.
Meanwhile, Goldman Sachs Group Inc. warned that the outbreak of the coronavirus will cut U.S. economic growth by 0.4 percentage point in the first quarter as the number of tourists from China declines and exports to the Asian nation slows.
A subsequent rebound of 0.3-0.4 percentage points in the second quarter will help to minimize the full-year impact on the U.S. economy, resulting in a marginal drop in growth of about 0.05 percentage point, Goldman economists led by Jan Hatzius wrote in a note.
Risks to this baseline scenario are “skewed toward a larger hit because a change in the news flow could lead to increased risk aversion -- less travel, commuting or shopping -- or a sustained tightening in financial conditions,” the economists said, according to Bloomberg.
White House economic adviser Larry Kudlow said Thursday the U.S. hasn’t seen any major effects on its economy from the spread of the coronavirus, and will refrain from using it as leverage in the second phase of China trade talks.
“This is principally a public-health problem and the pandemic of course is in China, not the U.S.,” Kudlow said Thursday in an interview on Fox Business Network. “Insofar as the economy, we see no material impact.”
Meanwhile, the U.S. central bank’s No. 2 official said it’s too early to determine whether the coronavirus outbreak in China will significantly affect the U.S. economy, which remains in a “good place.”
“It is a wild card,” said Federal Reserve Vice Chairman Richard Clarida in an interview on Bloomberg Television Friday. “We’re looking into how it translates into the outlook for Chinese growth, for global growth and for how it impacts the U.S.”
Clarida said the U.S. economy could absorb a temporary stutter, saying “if this were to result in, say, a one or two-quarter slowdown in growth, that’s probably not something that changes the big picture. But I do agree it’s a challenging situation. We’re going to keep on top of it.”
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