Friday, October 23, 2020

Q3 GDP Forecasts

by Calculated Risk on 10/23/2020 11:42:00 AM

From Merrill Lynch:

The advance 3Q GDP report should reveal a historic 33% qoq saar rebound in real activity, driven largely by recoveries in consumption, residential and equipment investment. This forecast will recoup half of the decline in GDP during from the COVID shock. [Oct 23 estimate]
emphasis added
From Nomura:
Base effects will drive Q3 2020 real GDP higher but monthly data suggest the recovery has entered a slower phase. We think real GDP rose 34.7% q-o-q saar (7.7% q- o-q unannualized) in Q3, highlighting the swifter-than-expected pandemic recovery thus far. As COVID-19 weighs on activity, we expect a more gradual recovery through H1 2021 before an acceleration in H2. [Oct 23 estimate]
From the NY Fed Nowcasting Report
The New York Fed Staff Nowcast stands at 13.7% for 2020:Q3 and 3.5% for 2020:Q4. [Oct 23 estimate]
And from the Altanta Fed: GDPNow
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2020 is 35.3 percent on October 20, up from 35.2 percent on October 16. [Oct 20 estimate]
It is important to note that GDP is reported at a seasonally adjusted annual rate (SAAR).  A 35% annualized increase in Q3 GDP, is about 7.8% QoQ, and would leave real GDP down about 3.3% from Q4 2019.

The following graph illustrates this decline.

Recession Measure, GDPClick on graph for larger image.

This graph shows the percent decline in real GDP from the previous peak (currently the previous peak was in Q4 2019).

This graph is through Q2 2020, and real GDP is currently off 10.2% from the previous peak.  For comparison, at the depth of the Great Recession, real GDP was down 4.0% from the previous peak.

The black arrow shows what a 35% annualized increase in real GDP would look like in Q3.

Even with a 35% annualized increase (about 7.8% QoQ), real GDP will be down about 3.3% from Q4 2019; a slightly smaller decline in real GDP than at the depth of the Great Recession.