US Recession Watch Overview:
- Although US Treasury yields have risen in recent weeks, 4Q’20 growth expectations have slid. A double dip recession may or may not be avoided in 1Q’21, depending upon the timing of US fiscal stimulus.
- The New York Nowcast estimate for 4Q’20 GDP is at +2.58%, while the Atlanta Fed GDPNow model is pointing to loftier+7.5% growth.
- Rates markets continue to forecast no change in the Federal Reserve’s main interest rate through January 2022; the Fed has pledged to keep rates low through 2023.
Making Sense of US Economic Data
On Thursday, the 4Q'20 US GDP report was released a showed a rate of +4% growth, meeting consensus by Bloomberg News. But this represents a sharp deceleration after surging by a record +33.4% in 3Q’20. Depending upon where you look, estimates varied significantly ahead of the release. The New York Nowcast estimate for 4Q’20 GDP was at +2.58%, while the Atlanta Fed GDPNow model was pointing to loftier +7.3% growth.
But the fact of the matter is that Bloomberg consensus forecasts and the regional Fed bank forecasts have been coming down for the past several weeks, reflecting a deceleration in US growth as the coronavirus pandemic entered its darkest days. Even though the next tranche of US fiscal stimulus was agreed upon at the end of the Trump presidency, it is still possible that 1Q’21 US GDP comes out in negative territory (but we won’t find that out until April).
Atlanta Fed GDPNow Q4’20 US GDP Estimate (January 26, 2021) (Chart 1)
Rising US initial jobless claims, weakening ISM and PMI surveys, and disappointing consumption figures all point to a US economy that has decelerated in recent months. No surprise, this deceleration has mirrored the sharp rise in coronavirus infections, hospitalizations, and deaths.
But the
