The Atlanta Fed lowered its GDP growth estimate for the second quarter of 2015 to 1.5% from 1.7% after the latest data. In their words:
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2024 is 1.5 percent On July 3, down from 1.7 percent on July 1. Following this morning’s releases from the U.S. Census Bureau, the U.S. Bureau of Economic Analysis, and the Institute for Supply Management, the current forecasts for real personal consumption expenditure growth in the second quarter and real private GDP growth in the second quarter were lowered from 1.5 percent and 6.9 percent, respectively, to 1.1 percent and 6.5 percent, while the current forecast for the contribution of real net exports to real GDP growth in the second quarter was raised from -0.94 percentage points to -0.78 percentage points.
The next update to GDPNow is: Wednesday, July 10.
The Atlanta Fed’s GDP gauge is now nearing 4.3%. That’s at the low end and below what is considered trend growth near 2%.
Although Fed Chairman Jerome Powell reiterated yesterday that the bank will remain patient with inflation remaining above its 2% target, and does not expect to reach that target before 2025. With growth slowing and the Fed chairman signaling that deflationary forces are re-establishing, further inflation surprises could prompt the Fed to cut interest rates sooner rather than later.
Employment will also be closely watched. The June nonfarm payrolls report is due on Friday with expectations of 190,000 jobs. Today, national private sector employment growth was 150,000.
The ISM non-manufacturing index also came in much weaker than expected at 48.8 versus 52.5. The employment component remained below 50 for the fifth straight month at 46.1 versus 47.1 last month.
At 2 p.m., the minutes of the Federal Open Market Committee’s last meeting will be released.