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Atlanta Fed Lifts GDP Estimate to 4.8 Percent

Atlanta Fed Lifts GDP Estimate to 4.8 Percent
(Melinda Fawver/Dreamstime)

By    |   Saturday, 02 June 2018 09:44 PM

Friday’s blockbuster jobs data capped a long line of recent strong economic reports which has led to much brighter forecasts for American growth under President Donald Trump.

The Atlanta Fed on Friday said it expects U.S. gross domestic product (GDP) to expand at a 4.8 percent pace in the second quarter, up from 4.7 percent on May 31. Friday's revision was just the latest in a recent handful of surging revisions. On May 25, the measure predicted four percent GDP growth.

Meanwhile, the New York Fed’s Nowcast also rose Friday, to 3.5 percent from 3.0 percent a week ago

The improved forecasts come even as the stimulus from a $1.5 trillion income tax cut package and increased government spending is yet to be fully felt.

Meanwhile, the government said Friday that U.S. job growth accelerated in May and the unemployment rate dropped to an 18-year low of 3.8 percent, pointing to rapidly tightening labor market conditions.

The strong employment report added to a string of recent upbeat economic data, including consumer spending, industrial production and construction spending, that have suggested economic growth was regaining speed early in the second quarter after expanding at a moderate 2.2 percent annualized rate in the January-March period, Reuters explained.

The Atlanta Fed forecasts a big boost in private sector fixed investment, which includes capital investment in machinery, land, buildings, vehicles, and technology, Breitbart reported. 

The Atlanta Fed had expected this to expand at a 4.6 percent rate but after the release Friday of a construction spending report from the U.S. Census Bureau and the Manufacturing ISM Report on Business from the Institute for Supply Management, the growth pace was increased to a 5.4 percent rate. Consumer spending is expected to grow at a 4.6 percent rate, up from 3.4 percent prior to the Friday data releases, the Atlanta Fed said.

Meanwhile, the closely watched employment report released by the Labor Department on Friday also showed wages rising solidly, cementing expectations that the Federal Reserve will raise interest rates this month and boosting the probability of two more hikes later in the year. It also renewed fears about the economy overheating.

Nonfarm payrolls surged by 223,000 jobs last month as warm weather bolstered hiring at construction sites. There were also big gains in retail and leisure and hospitality payrolls. The economy created 15,000 more jobs than previously reported in March and April.

Last month’s one-tenth of a percentage point drop in the unemployment rate pushed it to a level last seen in April 2000. The jobless rate is now where the Fed forecast it would be by the end of this year.

Average hourly earnings rose eight cents, or 0.3 percent last month after edging up 0.1 percent in April. That pushed the annual increase in average hourly earnings to 2.7 percent from 2.6 percent in April.

“The strength of the labor market supports our forecast for the Fed to raise rates three more times this year,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “The Fed is going to get antsy that the labor market will blow too far past full employment.”

Meanwhile, Trump's chief economic adviser claimed that the jobs report is indicative of the robust economic growth awaiting America.

“I believe we've entered into the longest largest prosperity in a couple of decades. I know it's early in the game,” Larry Kudlow, director of the White House's National Economic Council, told CNBC.

“This is a prosperity era. It's a strong economy. What you've got here is continued job growth, low unemployment, and participation rates pretty good,” said Kudlow, who served as the Trump campaign's senior economic adviser.

(Newsmax wire services contributed to this report).

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Friday’s blockbuster jobs data capped a long line of recent strong economic reports which has led to much brighter forecasts for American growth.
atlanta, fed, gdp, estimate, economic
Saturday, 02 June 2018 09:44 PM
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