And Then Recession Reality Set In....

The Atlanta Fed’s GDPNow Nowcast for Third Quarter GDP Growth got a bit of a reality check yesterday, dropping 1.2 percentage points to 1.4% from the 2.6% of only a week ago.

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2022 is 1.4 percent on September 7, down from 2.6 percent on September 1. After recent releases from the US Census Bureau, the US Bureau of Labor Statistics, the US Bureau of Economic Analysis, and the Institute for Supply Management, the nowcasts of third-quarter real personal consumption expenditures growth, third-quarter real gross private domestic investment growth, and third-quarter real government spending growth decreased from 3.1 percent, -3.5 percent, and 1.7 percent, respectively, to 1.7 percent, -5.8 percent, and 1.3 percent, respectively, while the nowcast of the contribution of the change in real net exports to third-quarter real GDP growth increased from 0.82 percentage points to 1.09 percentage points.

A major factor in the decline is a drop in consumer spending (PCE Index)—with the model noting indicators of declining consumer spending in the third quarter starting with the June Personal Income and Outlays report released by the BEA on July 29.

With two quarters of contracting GDP already down for 2022, the nowcast is inching close to showing contraction for the full year—and there’s still opportunities for the nowcast to fall even further.

Has Janet Yellen conceded that we’re in a recession yet?